Civil Procedure: Erie Doctrine
Below is an outline of the Erie doctrine, originally assembled by Lexis – which can be found here. I thought of how to better present this, but I failed. Lexis knows best, though I did trim some of the fat from the original.
Summary of Erie Analysis Under Modern Law
Modern Erie doctrine invokes all three tests:
- Substance v. Procedural Test
- Modified Outcome Determinant Test,
- Balancing test of state and federal interests — depending on the circumstances of individual cases.
(1) The substance-versus-procedure test serves as a first-stage screening device in Erie analysis. An issue that clearly addresses legal rights is substantive and is to be resolved according to state law; issues that clearly pertain to the judicial process alone are procedural and invoke federal law.
(2) Where the issue is not grounded entirely on substantive or procedural policies but instead derives from both, such as a statute of limitations, the next level of analysis of the Erie doctrine is the outcome-determination test, under which state law controls where it serves substantive interests at least in part and where refusal to do so would affect the outcome of the case.
(3) Erie doctrine does not apply if there exists a federal rule that addresses the issue at hand, and it conflicts with state law. In such cases, the federal procedural rule controls.
(4) When the issue invokes the Erie doctrine but is not adequately resolved by the substance-versus-procedure and modified outcome-determination tests, the policies underlying both the federal law and state law are examined, with weight given to the policy of greater importance.
Rules of Decision Act (RDA)
The Erie Doctrine does not apply to cases regarding a federal question (§1331 Federal Rules of Civil Procedure). In cases involving a federal question, both state and federal courts must apply federal law. However, in cases brought to federal court under §1332 (diversity jurisdiction), state law will be applied. In Swift v. Tyson, the courts interpreted this narrowly and only applied state statutory law, not state common law.
Erie Doctrine: “Substance v. Procedure” Test
The Erie Doctrine held that federal courts must apply both state statutory and common law, which effectively overruled the decision in Swift v. Tyson.
In Erie Railroad Co. v. Thompkins, 304 U.S. 64 (1938), the Supreme Court concluded there can be no federal general common law. Furthermore, the Rules of Decision Act did not distinguish between state law that is legislatively created and state law that is judicially created, and thus the Act did not confer upon federal courts the power to determine substantive common law.
Erie established that in federal diversity cases, matters characterized as substantive would be governed by state law, and those characterized as procedural would be governed by federal law. This became known as the “substance versus procedure” test.
“Outcome Determinant” Test
In Guaranty Trust Co. v. York, 326 U.S. 99 (1945), the Court concluded that the substance-versus-procedure test would not be adequate to resolve all issues arising under the Rules of Decision Act where a state law is both substantive and procedural in purpose, such as statutes of limitations. In Guaranty Trust the defendant argued that Erie required application of the state statute of limitations, which would have barred the action, while the plaintiff argued that federal law, under which the action was timely filed, governed.
The Supreme Court explained the intent of the Erie doctrine to be that in diversity cases “the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court.” Under this “outcome-determination” test, state law controls if the choice between state or federal law could be outcome-determinative in the case. The court applied state procedural law, as it would have substantially affected the outcome to do otherwise. This test was further refined in Byrd v. Blue Ridge.
“Balancing of Governmental Interests” Test
In Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525 (1958), a negligence case, the defendant argued that the plaintiff’s claim was covered by workers’ compensation, for which South Carolina precluded a jury trial. Noting that the outcome of the case could be substantially affected by the issue of whether the case was tried by a judge or a jury, the Supreme Court nevertheless concluded that the outcome-determination test did not suffice in close cases. The Court added a step to the analysis that involved a balancing of the governmental interests behind the rules contending for application. On the facts at issue in Byrd, the Court held that the plaintiff was entitled to a jury trial, finding that the federal policy supporting jury trials was stronger than any policy beneath South Carolina’s rule precluding jury trials in such cases.
Federal Rules Trump Conflicting State Law
The Supreme Court added yet another step to the choice-of-law analysis in Hanna v. Plumer, 380 U.S. 460 (1965). The plaintiff suffered personal injuries in an automobile accident and brought a federal diversity action against the estate of the alleged wrongdoer. The plaintiff served the administrator of the estate by leaving a copy of the papers at his home in compliance with FRCP (4)(d)(1). The defendant-administrator argued, however, that the action could not be maintained because he had not been personally served as required by Massachusetts law.
The Court held that federal procedural rules (unless found constitutional and invalid under the Rules Enabling Act) are not overridden by state law or policy. Thus, Erie does not control when there exists an applicable federal rule that conflicts with the state law or policy.
Rules Enabling Act (REA)
An applicable Federal Rule of Civil Procedure controls, so long as it is constitutional and complies with the Rules Enabling Act, 28 U.S.C. § 2072, which in part states that federal rules “shall not abridge, enlarge or modify any substantive right.” In Burlington Northern Railway v. Woods, 480 U.S. 1 (1987), the Supreme Court determined that rules which incidentally affect litigants’ substantive rights do not violate the Rules Enabling Act if such laws are reasonably necessary to maintain the integrity of that system of rules. In fact, the Court has never invalidated any Federal Rule of Civil Procedure under the Rules Enabling Act. When a federal rule and state law or policy conflict, the Hanna analysis is relevant and the federal court is to apply the federal rule. However, when there is no conflict, the Erie doctrine controls.
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