Erie doctrine

The Erie doctrine is a fundamental legal doctrine of Civil procedure in the American legal system that stems from Supreme court Justice Louis Brandeis' watershed opinion in Erie Rail Road v. Tompkins 304 US 64 (1938). That decision overturned a previous decision of the court, Swift v. Tyson, which allowed federal judges sitting in a state to ignore the local decisions of state courts in the same state in cases based on diversity jurisdiction.

It is important to note that the Erie doctrine does not apply to cases involving federal statutory law, but only those cases that are in federal court because of diversity jurisdiction. Diversity jurisdiction is based on the different citizenship of the parties (Federal Courts require "complete diversity," because of an old decision by Justice John Marshall Strawbridge v. Curtiss 7 U.S. (3 Cranch) 267 (1806)). For example, while a Texan could get into federal court based on diversity by suing an Oklahoman, a citizen from Texas cannot bring a suit in federal court against both an Oklahoman and a Texan as there is not "complete diversity").

The Erie case involved a fundamental question of federalism and the jurisdiction of federal courts in the United States. Congress passed a law still in effect today called the Rules of Decision act (28 USC 1652), which states that the law of a state furnishes the rules of decision for a federal court sitting in that state. Thus, a federal court in Texas, hearing a case based on the diversity of parties (as opposed to a federal statute), has to follow the laws of Texas is resolving a case before it. The Supreme Court's decision in Swift had defined the laws of the state as meaning only laws passed by legislatures of that state (though Justice Joseph Story writing for the court suggested that federal courts should pay special attention to how the "local tribunals" of a state would resolve a dispute). Thus on issues of "general common law" a federal court was free to ignore decisions by a state's highest court.

The decision in Swift resulted in inconsistent judicial rulings in the same state on the same legal issue depending on whether a plaintiff brought a case in state or federal court. In one case, for example, Black and White Taxicab Co. v. Brown and Yellow Taxicab Co. 276 U.S. 518 (1928)., the Brown and Yellow Cab Company, a Kentucky corporation sought to create a business association with the Louisville and Nashville Railroad where Brown and Yellow would have a monopoly on soliciting passengers of the rail road, effectively eliminating the competition, the Black and White Cab co. Such an agreement was illegal under Kentucky common law as interpreted by Kentucky's highest court. The Brown and Yellow company dissolved itself, reincorporated in Tennessee and executed the agreement there, where such an agreement was legal, bringing suit against Black and White in a Kentucky federal court to prevent them from soliciting passengers. The federal court upheld the agreement citing Swift and arguing that under general federal common law, the agreement was valid. If Brown and Yellow had brought suit in a Kentucky state court, the agreement would not have been upheld.

The decision in Erie involved a railroad accident. The plaintiff Tompkins lost his arm while walking on Erie's rail road tracks in Pennsylvania. In most states, Tompkins could sue for negligence of the rail road and recover monetary damages for his loss. But, in Pennsylvania at the time, Tompkins would have been considered a trespasser and could not recover in state court. Thus, Tompkins brought his case in federal court to avoid the unfavorable state law. He subsequently won. However on appeal to the Supreme Court, Brandeis held that such decisions and inconsistent rulings based on a general federal common law were unconstitutional and that decisions by a State's Supreme Court were "laws" that federal courts were bound to follow under the Rule of Decision Act. Brandeis and the court felt that Swift allowed federal courts to make unconstitutional modifications of the substantive law of a state, violating someone's right to equal protection under the law (but Brandeis did not mean in the sense of the Fourteenth Amendment).

Several later cases have added onto the vague Erie decision (Brandeis cites no provision of the Constitution that Swift violated, though theoretically it might violate the Tenth Amendment's reservation of powers to the state). Speaking generally, there are two approaches in determining whether a federal court will apply a state law: (1) the Hanna & Rules Enabling Act approach per 28 USC 2072 when there is a federal rule of civil procedure and statute that conflicts with a state law; and (2) the Byrd - Erie approach when there is as conflict between a state and federal practice.

Under the first approach, the federal court of a statehearing a case based on diversity jurisdiction should apply state law in the event of conflict between state and federal law if the state law deals with substantive rights of state citizens. The Supreme Court has defined a substantive rights as, "rights conferred by the law to be protected and enforced by the adjective law of judicial procedure." Sibbach v. Wilson 312 U.S. 1 (1941). An example of a substantive right would be a state law on fraud, which may vary widely in composition depending on the jurisdiction. If the state law is merely procedural --i.e., relating merely to the form and mode of judicial operations-- then the federal court does not have to apply the conflicting state law. The main problem of analysis under this first approach is determining whether a state law is "substantive or "procedural," as a single law can have both substantive and procedural elements.

In regards to the second approach, unless there is a major countervailing federal policy that trumps the state practice, if ignoring the state law would lead to forum shopping by plaintiffs and unequal administration of the laws (like in Yellow Cab above), the court should apply the state law. The main goal of the Erie decision was to prevent "forum-shopping," a practice where plaintiffs choose a legal forum simply because of the probability of a more favorable ruling. The main problem with the decision is that sometimes there is simply no state law or practice on which a federal court may defer. Federal judges are left to guess how a state court would rule on a given legal question, and a state court is in no way bound by a federal decision interpreting their own state law.

Brandeis' opinion in Erie was his most influential opinion ever and is one of the most often cited cases in federal judicial opinions.