This article is written by Nishka Kamath. It is divided into two major parts. The former part is the case analysis and significance of the  Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) case, whereas the latter part consists of everything one must know about the Erie doctrine. Further, at the very end, some frequently asked questions (FAQs) on the Erie Railroad case and the Erie doctrine have been discussed.

Introduction

“There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a State whether they be local in their nature or ‘general,’ be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.” -Justice Louis Brandeis. 

Well, even though this decision might not be widely known among laymen, I am quite certain most American law students, lawyers, and legal scholars must definitely be aware of one of the most important decisions in the history of the US Supreme Court and the case is none other than Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), wherein Justice Louis Brandeis spoke the aforementioned lines. This decision ‘goes to the heart’ of the American system of federalism and the relationship between the US federal government and the states.

In this landmark case, the US Supreme Court gave a ruling stating that there is no ‘general federal common’ in the US and that the federal courts in the US must apply state laws and not federal law to any lawsuits wherein the parties are from different states that do not involve federal questions. With this verdict, the Court overturned almost a century of federal civil procedure case law and laid the groundwork for modern legal diversity jurisdiction.

Overview of the case

On July 27, 1934, in the early hours, a man named Harry Tompkins was returning home along a pathway that was adjacent to the railroad tracks in Hughestown, Pennsylvania. In the meantime, a train approached, and as it passed, an object, apparently an unmatched door, protruding from one of the train cars hit him and he fell off onto the ground. By the knock, Tompkins landed on the tracks and the wheels of the train crushed his right arm. An ambulance was called that took him to the nearest local hospital. In the hospital, doctors amputated most of his right arm.

The train that knocked off Thomas was owned and operated by the Erie Railroad Company. Tompkins sued the Erie Railroad Company for negligence. As Tomkpkins resided in Pennsylvania and Erie Railroad was based in New York, Tompkins invoked diversity jurisdiction and proceeded to file a lawsuit in a US Federal Court rather than that of Pennsylvania or New York State Court.

The case was tried in the US District Court for the Southern District of New York, with US District Judge Samuel Mandelbaum presiding. During the trial, the lawyers arguing on behalf of Erie Railroad contended that Pennsylvania law should govern Tompkins’s negligence claim. They further claimed that the pathway along with which Tompkins was walking when the train knocked him off was an Erie Railroad right-of-way. Now, when such an incident has taken place in the past, the Supreme Court of Pennsylvania has reached the inference that, in accordance with Pennsylvanian law, any individual walking along a railroad’s right-of-way will be said to be a trespasser and the railroad will not be liable for negligence (in case of any mishap) unless its negligence was ‘wanton’ or ‘willful’. 

Please note : Here, the term ‘wanton’ means occurring without motivation or provocation, and the term ‘wilful’ means deliberate or intentional.

Now, as Tompkins did not claim that there was a ‘wanton’ or ‘willful’ negligence on Erie Railroad’s part, the lawyers on behalf of Erie Railroad Company filed a motion to dismiss his claim, citing some Pennsylvanian cases. Justice Mandelbaum rejected the motion, thus claiming that under Swift v. Tyson 41 U.S. 1 (1842), Tompkins’s claim was governed by federal common law and not that of Pennsylvanian law. 

The trial thus went forward. In October 1936, the jury held Erie Railroad to be liable for Rompkin’s injuries. The jury further claimed that Tompkins must be awarded $30,000 in damages.

Aggrieved by this, Erie Railroad appealed the verdict to the US Court of Appeals for the Second Circuit. Here, a panel consisting of-

1. Martin Thomas Manton, 
2. Thomas Walter Swan, and
3. Learned Hand

gave the judgment after hearing the appeal in favor of Tompkins, thus affirming the verdict of the Trial Court. The Railroad Company then made an appeal to the US Supreme Court, which agreed to hear the case and then granted certiorari.

On April 25, 1938, the US Supreme Court, by a 6:2 majority, gave a decision in favor of the Erie Railroad. And with this judgment, the Swift v. Tyson case was overruled. The US Supreme Court held that US federal courts must apply state law, and not general “federal common law” when it comes to adjudicating claims in lawsuits between individuals who belong to different states in the US. The Court further stated that both, i.e., the District Court and the Second Circuit Court, have made a mistake by not applying Pennsylvanian law to Tompkins’s claims against Erie Railroad. The Supreme Court, thus, overturned the decision given by the Second Circuit and remanded the case, instructing the Court to ascertain whether or not the railroad company’s interpretation of Pennsylvanian law has been apt.

Let us now understand the whole case in great detail.

Details of the case

Case citation

Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938);

304 U.S. 64;

58 S. Ct. 817; 82 L. Ed. 1188;

1938 U.S. LEXIS 984;

11 Ohio Op. 246;

114 A.L.R. 1487.

Related laws or laws applied

• US Const. Art. III (implied); 
• Judiciary Act of 1789 § 34 (now 28 U.S.C. § 725); 
• Rules of Decision Act (now 28 U.S.C. § 1652).

Court(s) where the case was/were filed

1. The Federal District Court for the Southern District of New York
2. The US Court of Appeals for the Second Circuit
3. The Supreme Court of the United States

Parties to the case

Plaintiff

Mr. Harry J. Tompkins

Defendant

Erie Railroad Company

Argued

January 31, 1938

Date of judgment 

April 25, 1938

Judges and bench who delivered the judgment(s)

The Federal District Court for the Southern District of New York

Judge

Albert W. Johnson

The US Court of Appeals for the Second Circuit

Chief Judge

Augustus N. Hand

Circuit Judges

The case was before the Circuit Judges, namely:

• Thomas W. Swan, 
• Martin Manton, and 
• Learned Hand.

The Supreme Court of the United States

Chief Justice

Charles E. Hughes

Other Justices (or Associate Justices)

The other justices participating in the decision were:

• James C. McReynolds, 
• Louis Brandeis,
• Pierce Butler, 
• Harlan F. Stone,
• Owen Roberts,
• Benjamin N. Cardozo,
• Hugo Black,
• Stanley F. Reed.

Case opinions

Majority

Brandeis, joined by Hughes, Stone, Roberts, Black

Concurrence

Reed

Dissent

Butler, joined by McReynolds.

Please note : Cardozo played no part in the consideration or decision of the case.

Docket no.

367

Legal background

As per the traditional view of the system of federalism in the United States, every state in the US is a sovereign polity in all aspects except for those the US Constitution commits to the federal government, which has sovereignty, supremacy, or predominance over the states in those areas. As a result, every state in the US has its own court and legal system, along with rules that cover all areas, such as:

1. Commercial law,
2. Contract law,
3. Criminal law,
4. Property law,
5. Tort law, and 
6. Family law.

Further, because of the historical origins of the United States in the British Empire, all 49 states in the US (except Louisiana) have either inherited or adopted the English common law for their legal systems. Following the Constitution’s ratification, Congress passed the Judiciary Act of 1789, thus creating the US federal court system underneath the US Supreme Court. This Act provided US federal courts with a kind of authority known as “diversity jurisdiction” authorizing them to resolve lawsuits in those matters wherein citizens of different states were involved. And the same dispute was over a considerable amount of money, even when no questions of federal law were present. Under Section 34 of the Judiciary Act, which is also known as the Rules of Decision Act, the federal courts should apply state laws when resolving cases that involve citizens of two (or more) US states. The laws of the states, unless otherwise ordered by the Constitution, and the US treaties or Acts of Congress shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply (28 U.S.C. § 1652).

Elucidating the meaning of this statute has been one of the most difficult legal issues in American federal jurisprudence. The statute asserts that the US federal courts shall apply state law when hearing cases under diverse jurisdiction. However, it does not mention whether or not the phrase ‘the laws of the several states’ is related to only those statutes that are passed by a state legislature or if it also encompasses the common law decisions of the Supreme Court of a particular state.

The US Supreme Court dealt with this question in the Swift v. Tyson case. In this case, the Court ruled that the Rules of Decision Act’s phrase ‘laws of the several States’ referred only to each state’s statutory laws that were enacted by their legislatures and did not necessarily contain each state’s supreme court’s interpretation and construction of the English common law. Further, the Court inferred that this allowed US federal courts to develop a general American “federal common law” for federal courts that would cover areas like that of commercial law. But applying this judgment of the Court was quite tricky, and several American lawyers, judges, and legal scholars opposed the same during the late 19th and early 20th centuries.

History of Erie Railroad vs. Tompkins

This landmark case was argued on January 31, 1938, and was decided on April 25, 1938, by a majority of 6:2 votes. Well, the case mentions that the Judiciary Act of 1789 has a provision that states that “the laws of multiple states shall be regarded as rules of decision in trials at common law” in federal courts under Section 34. In modern times, this provision comes under the Rules of Decision Act and mandates federal courts to follow state substantive law in matters where the federal court has jurisdiction, considering that the parties are from different states but do not define the sources of law. 

In this landmark case of Swift v. Tyson 41 U.S. 1 (1842), Justice Joseph Story expounded the phrase “laws of the several states” to include statutes and the law of real property but to exclude “contracts and other instruments of a commercial nature“, which federal courts could construe in the light shed by the “general principles and doctrines of commercial jurisprudence“.

The story thus calls for establishing a federal common law in the field of commercial law.  His words elevated what was once an ambiguity into an enigma. Swift, on its own, would not have been severely distracted by the federal system. However, after the Civil War, the concept of a general federal common law went through a seemingly limitless expansion beyond the commercial law ambit of Swift. This expansion encompassed areas like:

1. Civil Procedure
2. Municipal bonds,
3. Corporations, 
4. Torts,
5. Real property, and
6. Worker’s compensation. 

In the meantime, the power of the federal courts was also growing rapidly and the federal courts were applying doctrines of substantive due process and liberty of contract to annul federal and state economic regulation.

Conservatives praised these substantial advancements and the accompanying expansion of the federal court’s diversity jurisdiction as crucial for protecting the interests of eastern investors in the southern and western states, while progressives criticized the tendency of huge corporations to approach the federal courts to avoid state regulatory policies. A notable instance of this occurred in the Black & White Taxicab case of 1928 [Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U.S. 518 (1928)], where federal courts invoked a Swift derived ‘general law’ to thereby authorize a corporation to avoid state antitrust legislation. Troubled by such an application of judicial power’s use, the progressives were determined to eradicate Swift and its implications.

So, this opportunity arose in the case of Erie, which overturned Swift’s judgment. Justice Louis D. Brandeis, in his statement, claimed that “there is no federal general common law”. He further stated that he found Swift to be erratic with the intentions of the legislators who drafted the Rules of Decision Act. In a rare action in the history of the Court, Brandeis held that one of Swift’s decisions was unconstitutional, presumably as an invasion of rights reserved to the states under the Tenth Amendment.

Yet, Erie did not eliminate the idea of a federal common law. Also, Brandeis, on the same day as he handed down his Erie opinion, acknowledged the existence of specialized bodies of federal common law. Erie did not resolve the enigma of Swift. Since 1938, the Court has tried to articulate guidelines that would achieve “the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws”; however, the same has not made too much progress and the same is mentioned in Hanna. v. Plummer, 380 U.S. 460 (1965). Further, in Byrd v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525 (1958), Justice William J. Brennan proposed an approach that talked about balancing state and federal policy interests, while Chief Justice Earl Warren in Hanna sought to safeguard the Federal Rules of Civil Procedure from being overridden by state law by using an analytical approach that traces the rules’ validity to their statutory source, the  Rules Enabling Act of 1934, and thence to the Constitution itself. The debate engendered by Swift and Erie will continue as the Court continues to define the contours of judicial federalism in the United States.

Facts of the case

1. In July 1934, Mr. Thopkins was returning from his mother-in-law’s house based in Pennsylvania. He walked part of the distance along the railroad tracks of the Erie Railroad Company.
2. Meanwhile, while he was walking alongside the railroad tracks, a train passed by, and an open rail car door of the train hit Tompkins along the railroad tracks in Pennsylvania. 
3. This caused a severe injury to the right arm, which had to be amputated later.
4. Thompkins then filed a lawsuit against the Railroad Company in the Federal District Court for the Southern District of New York, where the corporation was based.
5. The Company also argued that Thompkins was a trespasser thereby and that under Pennsylvanian law, the Railroad must be held liable only for ‘wanton’ or ‘willful’ negligence.
6. Thompkins argued that Erie’s obligations and liabilities must be governed by federal common law. The trial judge, while giving the judgment, relied on Swift v. Tyson case and stated that the federal courts were only required to observe state statute and customary law, not state common law.

Please note : The decision of the US Supreme Court in the Swift v. Tyson case was that the federal courts sitting in different jurisdictions must apply a federal common law to non-statutory causes of action. On the other hand, if federal common law applied an ordinary negligence standard for duty of care owed by Railroad Company to individuals in the same situation (as Thompkins), Pennsylvania law would have required him to show ‘wanton’ negligence. 

7. Then, instead of applying the Pennsylvanian law, the District Judge applied the ‘general law’. The Judge gave his judgment, claiming that the Railroad Company was liable to compensate Thompkins even if it was guilty only of ‘ordinary negligence’. Thus, Thompkins was awarded for the damages under a duty of ordinary care.
8. The case was then appealed in the Circuit Court, wherein the judge agreed with the decisions made by Thompeal and upheld the verdict, claiming that federal courts have broad authority to decide general laws.
9. Further, the case went to the US Supreme Court, where the Railroad Company sought certiorari. The Supreme Court reached the inference that state laws should be applied in all circumstances besides when explicit federal regulation applies.

Rule of law

Legal precedent from the relevant state is binding. Except in matters explicitly governed by the United States Constitution or a federal act (or Act of Congress), the law that is applied in any case is that of the state where the event occurred.

Issue of the case

The main issue in this case was whether a federal court having a different jurisdiction followed the substantive law of the state wherein the activities leading to the suit thus arose or the law of the federal court in the state wherein the case was filed, perhaps in the forum state.

In simple words, the primary issue of this case was whether federal courts sitting in diversity jurisdiction apply to state or federal law.

Contentions of the parties

In this case, the major issues between the parties were concerned with the application of state common law in a diversity jurisdiction case. The dispute was on the question of which law the federal court should apply when it comes to diversity jurisdiction cases and whether they should create common law or apply the common law of the state in which they (the federal court judge) sit.

Plaintiff’s argument

On one hand, Tompkins, the plaintiff, argued that the federal court must adhere to the ‘Pennsylvania common law’ or ‘state law’. 

Defendant’s argument

On the other hand, Erie Railroad Co., the Defendant, contended that ‘federal general common law’ must be applied.

Judgment

The final judgment of the US Supreme Court was that state law should be applied. The decision given by the Court of Appeals was overturned by the US Supreme Court, which concluded that state laws should be applied in all circumstances except those in which explicit federal regulation applies. When judges are given the authority to choose which laws to apply and when courts are not required to adhere to state case law, it is impossible to have a unified judicial system.

Thus, the US Supreme Court overturned the decision of the Court of Appeals and held that the law of the state has to be applied except in matters governed by the United States Constitution or Act of Congress and that there is no federal common law.

Dissent

The dissenting opinion given by-

1. Justice Butler, and
2. Justice McReynolds 

were omitted and have not been mentioned in any casebook.

Concurrence

Justice Reed concurred. Justice Reed contended that the majority of the Justices’ decision was apt. He further stated that where Congress has not given any say, a federal court should apply the law of the state wherein the activities arose. Yet, he opposed the idea that there could be no such thing as a ‘federal common law’, instead the Congress has the authority to declare what rules of substantive law the federal courts shall use.

Analysis of Erie Railroad vs. Tompkins

The primary rationale behind the decision of the Supreme Court was to prevent forum shopping, i.e., the practice of choosing the court of jurisdiction that has the most favorable rules or laws for the position being advocated.

As per the old policy of allowing federal courts to pay no heed to the state’s substantive law, and rather apply ‘general law’, thus, leading to the applicability of the substantive law depending on whether enforcement was sought in the state or federal court. Furthermore, while making a claim that there is no such thing as a federal common law or that it does not even exist, the Court most likely refers to the judicial common law. Under common law, Congress implicitly retained the right to pass rules and make regulations governing the federal courts, for instance, the Federal Rules of Civil Procedure, inter alia. Moreover, in diverse cases where state law conflicts, federal courts must use both state and common law. 

Some other points to note

This case restricted the capacity of the federal courts to establish judge-made laws that would supersede state law. Legal scholars and jurists consider the decision of the Supreme Court to be both a modern cornerstone of American judicial federalism and an instance of legal realism’s influence. Before the Erie ruling, federal courts applied state statutory law but were not obliged to apply state common law rules in areas of general law like that of torts and contracts. Rather, federal courts formulated their own set of common law in these areas. This was not regarded as displacing state authority because law, from a jurisprudential perspective, was thought to exist independently of any sovereign; thus, federal courts were as competent as state courts in discerning the true common law. 

The decision taken by the US Supreme Court in the Erie case highlights the evergrowing concerns relating to the unjust method of applying different legal principles based wholly upon whether the case was filed in the state or federal court by the plaintiff of that case. It further spoke about legal realism’s emergence as a jurisprudential theory, thus rejecting the idea that common law is a transcendent body of law that is independent of any sovereign authority. 

Further, the ruling in the Erie case asserting that federal courts are in no position of authority to create general common law reflects the realist understanding that if a federal court announces a common law rule, it is creating federal law and must have a basis of authority in the US Constitution. The Court found no such general authority, although federal courts can develop their own rules of procedure.

Final remarks

Writing for the majority of Justices, Justice Louis Dembitz Brandeis reached the inference that it was time to make an exit from the rule in Swift and go seek greater uniformity in how the law is applied. Brandeis, contending that the decision taken in Swift went beyond boundaries of the appropriate constitutional role for the judicial branches, the federal courts do not have the authority to create their own set of common laws for matters that come under state law. He further suggested that the impact of that decision created a vertical separation of powers, thus involving the federal government and the states. Rather, he felt that applying state substantive law would lead to more probable outcomes for litigants and greater productivity for courts. Thus, the Court deduced that in cases involving diverse jurisdiction, courts must apply substantive state law and federal procedural law until there is a difference of opinion between substantive state and federal law. Additionally, Justice Stanley Forman Reed concurred (agreed), arguing that the Swift ruling was erroneous rather than unconstitutional. 

Whereas, Justices Pierce Butler and Clark McReynolds dissented from this opinion. Butler pointed out that neither of the parties had raised a constitutional question in the case, and therefore, the Court had decided it on inappropriate grounds. He was of the opinion that the Court went ultra vires (beyond its role) in this case and not that of Swift.

The Erie doctrine

What is the Erie doctrine

The Erie doctrine is said to be a fundamental legal doctrine under US civil law that necessitates that a federal court, when called to settle a dispute not explicitly addressing a federal question (most often when sitting in diversity jurisdiction but also when applying supplemental jurisdiction to claims factually related to a federal question or in an adversary proceeding in bankruptcy), must apply substantive law.

This doctrine follows from the US Supreme Court’s landmark judgment in the Erie Railroad case. As mentioned above, the Erie case overruled Swift v. Tyson (1842), which allowed federal judges sitting in a state to be oblivious or pay no heed to the common law local decisions of state courts in the same state when it came to diversity actions.

Origin of the Erie doctrine

The Erie case involved a fundamental question of federalism and the jurisdiction of US federal courts. In 1789, the Congress passed a law that is still in effect today, called the ‘Rules of Decision Act (28 U.S.C. § 1652), which claims that the laws of a state furnish the rules of decision for a federal court sitting in that state. Therefore, if there is a federal court in Texas that is hearing a case based on diversity (as opposed to a federal question), then it must adhere to the laws of the applicable state in settling a case before it.

Swift v. Tyson (1842)

The decision of the Supreme Court in Swift v. Tyson elucidated that the laws of the state mean only the laws passed by legislatures of that state (even though Justice Joseph’s story writing for the court suggested that federal courts should pay special heed to how the ‘laocal tribunals’ of a state would settle the altercations). Therefore, in matters relating to ‘general common law’, a federal court had the liberty to take no notice of decisions taken by the highest state court.

Aftermath of the Swift case

The judgment given by the US Supreme Court in the Swift case caused several inconsistent judicial rulings in the same state on identical legal matters, relying on the fact as to which court, i.e., the federal or state court, was the case filed by the plaintiff. For instance, in one of the cases [Black and White Taxicab Co. v. Brown and Yellow Taxicab Co. 276 U.S. 518 (1928)], the Brown and Yellow Cab Company, which was a Kentucky corporation, entered into a business agreement with the Louisville and Nashville Railroad, wherein there was a clause that Brown and Yellow Cab Company would have a monopoly or exclusive control over passengers traveling on the railroad; this in turn will help eliminate the competition- the Balck and White Cab Co. However, such an agreement was considered to be illegal under the Kentucky common law as interpreted by the highest court in Kentucky. So, Brown and Yellow Cab Company dissolved itself, reestablished the Company in Tennessee (where such an agreement was legitimate), and then took steps to execute the same agreement and further filed a lawsuit against the Black and White Cab Co., in the federal court of Kentucky to prevent the Co., from soliciting passengers. Citing the Swift judgment, the Federal Court of Kentucky upheld the agreement and contended that under ‘general federal common law’ the agreement was just and valid. Had Brown and Yellow bought the same suit in Kentucky State Court, the agreement would have been declared to be invalid and the judgment would be against the Brown and Yellow Cab Company.

Significance of the Erie Railroad decision and the Erie doctrine

As we know, the Erie Railroad decided it was a railroad accident. The Plaintiff, Mr. Tompkins, was walking near the tracks of a railroad in Pennsylvania when a train passed and an open door struck him in and knocked him under the train, causing severe injuries onto his right arm, which ultimately resulted in his right arm being amputated. This led to him taking a desk job. In most of the states in the US, Mr. Tompkins has the right to sue the Railroad Company for negligence and get monetary compensation as a part of recovery for the damages; however, in Pennsylvania, Tompkins was the trespasser and had no privilege of recovery in the case of an ordinary negligence claim in the State Court of Pennsylvania, as under the law of the state, a claimant is supposed to prove that there was ‘wanton’ negligence on the part of the defendant to claim recovery.

Aggrieved by this, Mr. Tompkins filed a lawsuit in federal court to avoid the unfavorable state law. He subsequently won the case. Yet, the Railroad Company made an appeal to the Supreme Court. In this opinion, drafted by Justice Brandeis, it was claimed that such decisions and inconsistent rulings based on a general federal common law were unconstitutional and that decisions by a state Supreme Court were ‘laws’ that federal courts were obliged to follow under the Rule of Decision Act. Justice Brandeis further stated that the Court felt that the judgment in Swift allowed federal courts to make unconstitutional amendments to the substantive law of a state. He affirmed that it was a violation of the Right to Equal Protection under the law, even though he did not mean it in the sense of the Fourteenth Amendment. The Court overruled the Swift judgment on its own initiative, as the parties to the Erie case did not explicitly address this concern.

Application of the Erie doctrine : some practical instances

When a claim is based on a question of federal law, the federal courts apply the relevant federal provisions and laws. The situation may become complex when the court’s jurisdiction over the lawsuit is based on the diversity of citizenship of the parties engaged in the controversy. This is where diversity of citizenship comes into play. Diversity of citizenship involves the plaintiff and the defendant living in two different states, with the amount of the legal dispute (also known as the ‘amount in controversy’) going beyond $75,000. In such matters, the plaintiff is then authorized to file a suit in federal court, which holds proper jurisdiction over both the parties and the legal claim, and the plaintiff’s claim is often based on issues of state law. Let us understand this concept with the help of some instances:

John, an individual residing in New York, was hunting for wild turkeys near the state border of Massachusetts. Don, an individual residing in Massachusetts, was enjoying a leisurely hike on a sunny fall afternoon. John mistakenly aims at Don, believing he is a turkey in some dense bushes, and takes a shot. Don was then looking at a rare flower blooming at the edge of the very same bush, but he (Don) was standing in Massachusetts territory. Don gets hit by the bullet in his leg, which leads to permanent damage, and this compels him to take a desk job. Don sues John in federal court in Massachusetts for $100,000 in personal injury damages and for the loss of future wages. The provision under New York states that this is the type of monetary relief Don is seeking through his claim, but there are federal laws, too, that may be applicable to the same action. 

In this instance, Don meets the necessary requisite of diversity jurisdiction to bring his lawsuit in federal court; yet, one significant issue is raised by the lawsuit being brought in federal court, i.e., which personal injury law should the federal court apply to give a verdict in the controversy? Don contends that the court must apply federal laws as he was the victim and that his physical presence was on the border of Massachusetts when the incident took place, thus applying the New York law was not feasible. Whereas, John contended that the court should apply New York law as he was in New York when he accidentally shot Don. The New York law may, for example, provide more protection for John by limiting the amount of the monetary damages recoverable by Don than the federal law. Alternatively, the third option for the court is to consider and apply the Massachusetts state law. Thus, the federal court is confronted with the dilemma of selecting the appropriate law in reaching a resolution of the controversy.

This legal question can be settled by applying the Erie doctrine, which helps the federal courts and attorneys to determine the apt law that is applicable in matters related to diversity jurisdiction. Before reading about the Erie doctrine, it will be helpful for the readers to learn about the legal history that led to the establishment of this doctrine.

Rules of Decision Act (RDA)

The Rules of Decision Act (RDA) is a federal statute designed by Congress in 1789 (which is now codified, in slightly different form, in 28 U.S.C. § 1652). The statute was Congress’ acknowledgment of the disputes that could arise between federal and state law. It says that the laws of the [] states, will be considered as rules of decisions in trials at common law in the courts of the US (as and when applicable), except when the Constitution, treaties, or status of the US provide or claim otherwise. Simply put, the statute prescribes that the federal courts are obliged to apply state laws in all matters except when there is a federal law applicable or when the Constitution or treaty addresses the issue explicitly. Let us understand this better with the help of an example.

Daniel, a citizen of Louisiana State, is the owner of ‘Graze and Scales Farm’ that breeds on the Gulf Coast. Then, there is an oil refinery- Petroleum, Inc., situated in Houston, Texas, based about 50 miles away from Daniel’s farm. One night, a mishap happened in the refinery and about 100 gallons of crude oil leaked from the refinery and polluted the waters of Daniel’s farm. This incident led to the deaths of several fish in the pond and an estimate of about $1 million was calculated. Aggrieved by this incident, Daniel filed a lawsuit in the federal court (under the principle of diversity jurisdiction) in Lousiana for the refinery did not successfully comply with the federal pollution control laws that restrict the discharge of petroleum to one barrel per year, per entity in the Gulf and inflict severe liability if someone fails to comply with the limit. 

Now, as per the Louisiana statutory law, no refinery will be held liable for accidental discharge of petroleum, especially when there was no negligence on the part of the refinery. This is a classic case where, under the RDA, the federal law would be applicable. While a state law exists on the subject, there is a federal law that is applicable to the matter directly at the center of controversy: the limitations of petroleum pollution in the Gulf. Thus, the federal court would apply the federal law in its ruling and Daniel would win in the case; thus, the judgment would be in favor of Graze and Scales Farm.

Now, let us assume the same facts as above, except in this scenario, there is no explicit federal law that addresses the conditions of this case, but there is a state statute existing that limits the liability for oil spills to negligence cases. Yet, the federal court notices that, even though there is no federal statute at this point, federal cases (i.e., federal common law) from around the country have uniformly held that any discharge of petroleum that leads to the killing of fish will be considered as a strict liability on the part of the spiller. The Court, thus, interrogates as to which laws one must apply- the Louisiana statute or the federal common law? This is where the RDA steps in and claims that the state law must be applied as the state law exists at a point when there was no federal statute contradicting it. 

The controversy over the RDA that paved the path for the Erie doctrine was what happens when there is no federal or statutory statutory law on point. In such a scenario, should the court apply federal common law or should the court apply state common law (as there is no statutory law) to ascertain the outcome of this case? Let us understand this with the help of an example.

Let us assume the same facts as above (Daniel v. Petroleum, Inc.), except here, neither Louisiana nor the federal statutes have any legislation or provision regarding the key question in this matter. The federal court discovers that there is no federal statute on point; federal cases (i.e., federal common law) from across the country have uniformly held that any discharge of petroleum that happens to kill fish will result in strict liability on the part of the spiller. However, Louisiana courts have generally turned down recognizing strict liability in such matters. Now, the question arises- should the court apply Louisiana common law or federal common law in this scenario?

For a solution to the question, the US Supreme Court reached a verdict that when state statutory law is absent, a federal court may apply federal common law in settling a legal controversy based on diversity jurisdiction even though there was state common law that addressed this issue [Swift v. Tyson, 41 U.S. 1 (1842)]. The Supreme Court’s explanation of the RDA held that the federal court has the choice to ascertain whether to apply federal or state law in a diverse jurisdiction context.

The overturned judgment

The Swift decision, as mentioned numerous times above, was overturned by the US Supreme Court in the Erie Railroad case in 1938. This paved the path for the establishment of the Erie doctrine. This case was based on a set of facts similar to the instance below:

Samuel, a resident of Colorado State, was at a railroad in Denver, Colorado. Cross Country Railroad (CCRR), a railroad company based under the law of Wyoming with its primary business in Jackson Hole, Wyoming, operated the railroad crossing. Samuel was unaware of the fact that the railroad crossing had been repaired and fixed recently but had erred in covering up a ditch. Samuel fell into the ditch and got severely injured. He sues CCRR in the Federal Court of Denver, Colorado, to recover damages for his personal injuries under the provisions of Colorado. There is a federal common law applying to victims who sustain personal injuries involving railroad crossings. Now, the question here is which law should the federal court apply, the federal law or the Colorado common law? Had it been governed under the Swift decision, the federal court would have applied the federal common law; but in the Erie decision, the Court reached an inference that the state substantive law should be applied even if that substantive law is a type of common law and not statutory law. Thus, the federal court would apply the Colorado common law to Samuel’s lawsuit in the instance above.

In the Erie case, the Supreme Court took this verdict one step further. The Court stated that the verdict would make a difference between substantive and procedural laws, thus treating them distinctively. The Court further claimed that federal courts must apply state laws to substantive law issues, like that of-

1. Personal injury, 
2. Employment discrimination, and
3. Workers compensation.

These laws establish the rights and duties of individuals and organizations. The Court made a distinction between substantive and procedural law issues like that of time limitations for filing a complaint and the procedures for filing a motion. The Court claimed that the courts must still apply federal law when procedural laws are in question. To understand this better, let us take the help of an example:

Assume the same facts as that of the aforementioned case. Samuel got injured on April 1, 2003. She filed a lawsuit in federal court on June 2, 2003. CCPR replied to the lawsuit on August 15, 2003. Additionally, the state and federal laws about Samuel’s personal injury claims require that a defendant file an answer within 90 days from the date of filing the complaint. Federal law mandates that a defendant must file an answer within 30 days from the date of filing the complaint. Now, one might wonder which law should be applied by the federal court in such a circumstance? As indicated in the Erie case, the federal court must apply federal laws. Since CCRR filed its answer after the 30 days limitation period, the answer thus filed was late. However, one must note that had the Colorado law been applied, CCRR’s answer would have been within the time limitation as per the statute. Yet, if there was a substantive law existing on the subject, the same must be applied over state law, as per the Supremacy Clause of the Constitution (United States Constitution: Article VI). This clause claims that federal statutory law prevails over state law. In cases where there is a conflict of law, like where there are laws of two or more states applicable to one case in federal court, the federal court must apply the laws of the state where the federal court is located. Let us understand this with the help of an example.

An individual residing in Oklahoma named Candice sustained injuries while working on an oil rig outside of Venezuela. The oil rig was owned by Oily Corporation, Cadice’s employer. For the injuries, Cadice sues the Corporation in a federal court in Oklahoma claiming monetary damages. On the one hand, Oklahoma law has a provision that claims that the employer would be liable for injuries, whereas, on the other hand, as per the provisions of Venezuelan law, no employee would be liable for compensation of recovery in monetary form for the injuries sustained. Now the question arises, which law should the court apply? 

In the above instance, the court must apply the law of Oklahoma which is the law of the state wherein the federal court resides. There is a direct conflict between the relief given under the provision of the Oklahoma law (which would give judgment in the favor of Cadice to recover the monetary damages) and the Venezuelan law (that would prevent Cadice from getting any compensation for the injuries sustained). One must consider reading the case of Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941), wherein the US Supreme Court applied the Erie Railroad principle. The Court held that a federal court sitting in diversity must apply the choice of law doctrine of the forum state to decide between choosing the forum state’s law and the other state’s law (as distinguished from the federal choice-of-law doctrines that had been used before Erie). Thus, the court must follow the law of the state, wherein the court is located, when allocating the burden of proof in a claim/case. The burden of proof can be regarded as the burden the law applies to a party in a controversy to prove the elements of a lawsuit. Say, for instance, a plaintiff has the burden of proving the elements of a personal injury case, including the fact that the defendant was the direct cause of the incident and that the injuries occurred as a result of the defendant’s actions.

It is crucial to emphasize that the Erie doctrine is only applicable to cases brought in federal courts where the issue is which law, i.e., federal or state laws, to apply.

Scope of the Erie doctrine

There are two main motives behind the Erie doctrine, namely:

1. To deter forum shopping (i.e., the practice of choosing the court of jurisdiction that has the most favorable rules or laws for the position being advocated) among litigants, and
2. To prevent inequitable application of the laws.

Broadly speaking, the latter motive is at times addressed as “vertical uniformity” and is deeply ingrained in the idea that within a specific state, the outcome of the litigation should not be significantly different just because the case was filed in a state court rather than a federal court or vice versa. 

Today, this doctrine is applicable irrespective of the fact that the federal court may hear a state claim. The federal court applies state common law; rather, it is obligated to do so when deciding state law issues or issues in diversity jurisdiction, supplemental jurisdiction, or bankruptcy jurisdiction. In effect, if the US Constitution does not govern and Congress has not enacted any legislation (or cannot do so) on a particular matter, then the laws of the state necessarily govern and state judge-made rules are equally binding over federal courts as those of the state statutes.

The federal courts have to ascertain whether-

1. The state law is clear as to the case in controversy, or
2. If not, there is the state’s highest court judgment specifically on the same matter.

In the latter case, the state law or judgment of the court must be followed; however, if this is not the case, then the federal court must ascertain how the state’s highest court would potentially give its verdict on the matter. For instance, this may involve looking at state appellate courts to see how they gave or will give a particular judgment, and if the state decides not to hear the appeals further, the federal court could deduce that the high court agreed with the appellate court’s decision. This determination is regarded as the ‘Erie guess’, even though the term ‘guess’ is a misnomer (or misleading) as the federal court must make a well-reasoned determination in its verdict.

On the other hand, the court may elect to certify the question to the state’s highest court for a ruling in the matter of state law. Some states, however, do not give federal district courts the authority to certify questions; thus, this immunity is reserved only for the Supreme Court or federal circuit courts of appeals.

Development of the Erie doctrine in later stages

Several cases have been added to the unclear and vague decision given in the Erie Railroad case (re, on being, the Justice who drafted the opinion- Justice Brandeis, did not cite which provision of the law was violated, even though, technically, in the Swift case, the Tenth Amendment’s reservation of powers of the state can be said to be infringed). Generally, there are two approaches to ascertaining which law should be applied, i.e., whether the federal court will apply state or federal law. The approaches are as follows:

1. The Hanna & Rules Enabling Act approach, per 28 U.S.C. § 2072, when there is a Federal Rule of Civil Procedure and statute that conflicts with a state law; and 
2. The Byrd-Erie approach is used when there is no conflict between a state and federal practice.

Let us understand these approaches in detail.

The Byrd-Erie approach

The Byrd-Erie approach suggests that until and unless there is a significant countervailing federal policy that outweighs the state practice if not paying attention to the state law would lead to forum shopping by plaintiffs and an unequal administration of the laws (like in the Yellow Cab case discussed above), the court must apply the state law. In Byrd v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525 (1958), the US Supreme Court decided that the federal policy allocating powers to judges and jury members as mentioned in the 7th Amendment of the US Constitution, superseded the state rule mandating a judge to ascertain whether or not an employer had immunity from a lawsuit. The primary motive behind the Erie doctrine was to fend off ‘forum shopping’. The main issue with the decision is that at times there is simply no state law or practice on which a federal court may defer. Thus, federal judges are left to guess how a state court would give its verdict on a given legal issue, and a state court is in no way bound by a federal decision interpreting its own state law.

Further, Justice Frankfurter in the case of Guaranty Trust Co. v. York, 326 U.S. 99 (1945) sums up the main point of Erie in a different manner and states that- The intent of the judgment was to make sure that in all lawsuits wherein a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should, to a great extent, be the same, so far as legal rules decide the outcome of a litigation, as it would be if tried in a state court.

With this affirmation, we can rightly say that the main motive behind Erie’s doctrine was to achieve equal protection under the law. One way that equal protection is intentionally disregarded would be through ‘forum shopping’, but the reduction of inequality was the primary aim of the doctrine.

The Hanna approach

As per the decision in Hanna v. Plumer, 380 U.S. 460 (1965), any federal court of state who is hearing a case related to diversity jurisdiction must apply state law in case there is a conflict between state and federal law- or when the relevant federal positive law is absent- if the state law deals with substantive rights of state citizens. Further, as per the Supreme Court, substantive rights can be defined as “rights conferred by the law to be protected and enforced by the adjective law of judicial procedure“. An instance of a substantive right would be a state law on fraud, which may differ widely in composition considering the jurisdiction. Further, if the state law is purely procedural or relates simply to the form and mode of judicial operations, then the federal court is not obliged to apply the conflicting state law. But, the substance-procedure distinction is a generality, as the Court rejected any test based upon the “litmus paper criterion“. Therefore, the court has to make a choice between state and federal law by considering the underlying policy or the outcome of the Erie decision.

The Court, further, made an announcement relating to the amendment of the ‘outcome determinative’ test in York, whereby the test must be applied in light of the twin aims of Erie, namely, to avoid forum-shopping and to avoid inequitable administration of the laws. As per this rule, state procedural law would not supersede federal procedural law if the differences in the outcome are non substantial or trivial, fail to raise Equal Protection concerns, and are unlikely to have an impact on the choice of forum.

The Gasperini approach : most recent case

In quite a recent case [Gasperini v. Center for Humanities, 518 U.S. 415 (1996)], the US Supreme Court spoke about the Erie problem. This case is a judgment given after the Hanna decision. This case addressed the conflict between state and federal law regarding the review of jury verdicts. In this case, the Plaintiff, a renowned artist and photographer from New York, sued a museum and a lawsuit was filed in the federal court of New York for damages caused by the loss of some pictures and slides he had given as a loan to the museum. The jury gave the case in his favor, and damages were awarded then. Aggrieved by this, the Defendant appealed and the US Court of Appeals for the Second Circuit diminished the damages awarded on appeal. Then, Gasperini made an appeal to the US Supreme Court.

As per the New York state provision, which is characterized as a ‘tort reform’ measure, gave permission to the appellate courts to  overrule a verdict given by the jury if it “deviates materially from what would be reasonable compensation.” In accordance with this law, the Second Circuit applied the state’s appellate standard of review. But the Supreme Court asserted that the federal courts, being bound by the reexamination clause of the Seventh Amendment, could overrule a jury’s finding of fact only if it “shocked the conscience“.

It is believed that the US Supreme Court could have settled the case by referring to the Seventh Amendment and treating it as controlling in federal court; yet, rather than such an approach, the Court chose a compromise, claiming that the federal court should apply the state’s lower standard of review, but in a manner that would not infringe the Seventh Amendment : instead of the federal appeals court scrutinizing the jury’s finding, it will be assumed that the responsibility would go to the trial judge.

Final say on the development of the Erie doctrine

The aforementioned case (Gasperini) and yet another case- Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001), have demonstrated that the Erie case has gone is a newer and a bit more complex direction than the preceding controlling cases, where the federal court is/was obliged to somehow combine federal and state law, depending on the issue in the case or the facts of the case. This can be quite frustrating for individuals who wish to have a ‘black letter rule’ that will redirect them to the solution. Yet, the possibility of combining the Erie doctrine does not necessarily open up limitless possibilities. In both these cases, i.e., Gasperini and Semtek, the common thread is that they are combined in a manner that is calculated to advance the goals of Erie (and York) : zero discrimination between litigants and prevention of forum shopping.

Conclusion

Now, we know, the case went on from the district court to the second circuit court and finally reached the US Supreme Court, where the bench of judges, by a 6:2 majority, dismissed the application of federal common law when it comes to diversity cases and inferred that federal courts should not design general common law rules that bind state courts in such cases. Rather, state law must govern such cases, except when there is an explicit federal law applicable based on the matter at hand.

The decision of the US Supreme Court in this landmark case has quite effectively overturned the long-standing doctrine of federal common law in diversity cases, as stated by the judges in the case of Swift v. Tyson in 1842. It dwelled on the significance of state law and the requirement that the federal courts adhere to state court decisions and statutes when deciding cases based on diverse jurisdictions.

Before the ruling of this case, cases were decided on the basis of what was considered to be a kind of federal common law, which was composed of ‘laws of the several states’ along with federal courts- not states’ interpretation of those laws (in the Swift case). The individuals who advocated for this earlier position believed that a federal common law contributed to national development, whereas the critics and individuals who criticized this position, argued that it disregarded states’ rights. In an unprecedented ruling, Justice Louis D. Brandeis declared the earlier Supreme Court decision (Swift) to be unconstitutional, thus changing the trajectory of diversity proceedings. Henceforth, there would be no federal ‘common law’ in diversity cases but only federal application of state laws.

Further, this case established the Erie doctrine (discussed in detail above), which requires federal courts to apply state substantive law and federal procedural law in diversity cases. This had a major positive impact on the evolution of American legal practice by reinforcing the principle that federal courts should not create substantive common law.

This landmark case had a broad impact on federal jurisdiction and the relationship between federal and state law. It affirmed the principle that federal courts should respect state sovereignty and respect the diversity of state laws when adjudicating cases.

Frequently Asked Questions (FAQs)

What is the Erie doctrine of choice of law?

The Erie doctrine states that federal courts must take state law into consideration while determining whether federal or state laws are applicable to a certain scenario. While inspecting claims in litigation involving citizens of various states, federal courts must follow the state law instead of ‘federal common law’.

Who won Erie v. Tompkins?

The Supreme Court of the United States gave its judgment in favor of Erie Railroad by a 6:2 majority on April 25, 1938. This judgment overturned Swift v. Tyson and found that the US federal courts must consider state law instead of ‘federal common law’ when adjudicating claims in litigation when it comes to citizens from different states being involved.

What was the major issue in the Erie Railroad Co. case?

The main issue in the Erie Railroad Co. case was whether the federal court must apply federal common law or state law in the diversity jurisdiction case.

What does the term ‘diversity jurisdiction’ mean and how is it relevant to the Erie Railroad case?

Well, diversity jurisdiction authorizes federal courts to hear cases that involve citizens of multiple states. In the present case, Tompkins filed a lawsuit against Erie Railroad Co. in a federal court, which led to a series of questions on which law should the court apply (i.e., federal common law or state law). 

What is substantive law?

The simple definition of substantive law is that it is an area of law that deals with an individual’s fundamental rights and responsibilities under the law. A speedy trial is an instance of procedural law, while the definition of a murder’s degree is a substantive law. Substantive law, which sets societal norms, and procedural law, which governs how those norms are enforced, are strongly intertwined.

Substantive law encompasses both- civil and criminal law. Some of these types of law include tort definitions, which describe the illegal behavior, list the specific unlawful conduct, and outline the potential punishments for infringing the law. Similar prohibitions against sexual and physical abuse can be found in the Penal Code.

Who gave dissenting opinions in the Erie Railroad case?

As mentioned above, Justice Butler, joined by McReynolds, stood in opposition to the verdict given in the Erie Railroad Co. case, thus contending that there is a need for a broader federal common law authority.

Did the Erie case totally eliminate federal common law?

No, the Erie Railroad case, most certainly did not eliminate federal common law entirely. However, Jr limited the application in diversity jurisdiction cases where state laws should govern.

Is the Erie doctrine only applicable to cases involving diversity jurisdiction?

Yes, Erie’s landmark judgment and subsequently the Erie doctrine is explicitly applicable to diversity jurisdiction cases, where federal courts are hearing conflicts between citizens of two different US states. The case and the doctrine have no application whatsoever to other cases wherein the federal courts have the jurisdiction- cases arising under the Constitution or laws of the United States or involving transactions or contracts entered into pursuant thereto. 

Has the Erie Railroad case faced any criticism?

Yes, the Erie Railroad case has faced criticism from several legal scholars and jurists, too. In their criticism, they have expressed major concerns about the possibility of forum shopping and inconsistency in applying state laws.

References

• John H. Ely, “The Irrepressible Myth of Erie,” Harvard Law Review 87 (1974): 693-740.
• https://www.oyez.org/cases/1900-1940/304us64 
• https://briefspro.com/casebrief/erie-railroad-v-tompkins/ 
• https://uollb.com/blog/us-law/erie-railroad-co-v-tompkins-1938-civil-procedure 
• https://www.casebriefs.com/blog/law/civil-procedure/civil-procedure-keyed-to-yeazell/the-erie-problem/erie-railroad-v-tompkins/ 

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