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Civil Procedure II
Santa Clara University School of Law
Russell, Margaret M.

Prof. Russell / Civ Pro outline for 2013 spring
 
 
V. ERIE DOCTRINE
1. SOURCE OF TERMS
 Statute: RDA (1789; 28 USC §1652), REA (28 USC 2072)
 Const: Art III (Fed J power) Art I (L power)
 Prior to Erie: RDA – SWIFT (SC interpretation of RDA) – SWIFT challenged
 Establishing the Erie Doctrine: ERIE – substance/procedure problem
 Development of Erie doctrine: YORK – Post-YORK confusion – BYRD balancing test
   YORK: emphasis on state side / BYRD: emphasis on fed side
 REA and Modern ERIE Doctrine: HANNA = fed ct to apply FR when a valid FR directly conflicts w state rules
   similar but not in conflict => FR addresses diff issue, apply ERIE/BYRD
 
ISSUE: vertical choice of law bt state law vs. fed law WHEN fed ct hears diversity cases (i.e. non-fed claims)
 
[R ex] Fed, State1 & State2
 
Suppose a suit of CA citizen v. NY citizen in S1 or S2, would the substantive law be different? = horizontal choice of law Q
 
Suppose a suit of CA v. NY in S or Fed, would the substantive law be different? = vertical choice of law Q
(fed and state ct have concurrent jx / so P/D chooses forum more favorable to his claim) 
Verticality ~ progression of issues (from state ct to fed ct) is essentially same
Same cause of action, same facts, same parties, identity of lawsuit in state ct to fed ct
ð  what law? Substantive law should not be different / Erie doctrine is to explain this
 
1.       Erie: have constitutional power to supplant state law with judge-made rules.  Whether substance or procedure as long as the outcome is not substantially diff. York
a.        Twin aims
2.       Congress has power to prescribe rules for fed courts, so long as those rules regulate matters “rationally capable of classification” as procedure. Hanna
a.        Legitimacy of FRCP = yes b.c it went thru the process approved by Cong
3.       SC is authorized to promulgate procedural rules unless the rules “shall not abridge, enlarge or modify any substantive right” REA
4.       Under the Rules Enabling Act, a Federal Rule is valid if it deals with “practice or procedure” (for enforcing rights) and does not “abridge, enlarge, or modify” a substantive right.  SIBBACH
a.        NOT the substantive or procedural nature or purpose of the affected state law
 
 [R] steps to ascertain state-fed law  
 
1.       GR = Under ERIE and its progeny, a federal diversity court is required to apply the substantive law of the state in which it is sitting. However, the federal courts apply federal procedural law in diversity cases. HANNA.
2.       Step 1. Is there a fed proc rule on point?
a.        If yes, then fed rule applies under HANNA holding ~ Supremacy Cl
                                                               i.      The court will apply fed law b.c a fed court must apply any valid fed proc statute or rule even if it conflicts w state law. HANNA.  
                                                             ii.      But, is it really on point and valid?
1.       On point? find the issue
a.        FR 23 is dispositive in fed diversity class action even when state law provides that certain class action cannot be raised & that state law is outcome-determinative SHADY GROVE
2.       Valid?
a.        Enacted by Congress => if constitutional, then apply
b.       FRCP = Promulgated by SCOTUS via congressional authority => REA analysis: IF valid under REA, then displace state law
                                                                                                                                       i.      HANNA 2 [H] (REA) fed ct held to apply FR when a valid FR directly conflicts w state procedural rules when the FR is broadly procedural under SIBBACH and does not “abridge, enlarge, or modify any substantive rights” (28 USC 2072(b))
3.       Step 2. If not, what is the conflict (substantive or procedural)?
a.        Non-FRCP base, b.c developed thru cases => go to RDA analysis
                                                               i.      No applicable fed rule or statute YORK
                                                             ii.      Applicable fed rule or statute, but not so on point WALKER
                                                           iii.      Applicable fed rule or statute on point, but invalid under Constitution or REA
b.       If it is based on FRCP => REA analysis
4.       Step 3. RDA/ERIE test ~ modified Erie analysis
a.        What is the conflict?
                                                               i.      Is it outcome-determinative? = Sufficient state interest? (YORK)
                                                             ii.      is the state law bound up w state-created rights and duties? = countervailing fed interest? (BYRD)
                                                           iii.      would applying fed law promote forum-shopping or inequitable administration of the laws)? (HANNA dicta)
b.       if the state law is not substantive/outcome-determinative, then apply fed law
c.        if the state law is substantive/outcome-determinative, then apply state law
d.        
e.        Under modified ERIE analysis, if the state interest is sufficient, fed ct exercising diversity jx should apply state substantive case law of the state where the fed ct sits unless there are strong fed procedural interest in not doing so.
                                                               i.      Substantive law means laws governing contents of the lawsuit.  Even though it looks like procedural on its face, if invoking state law would be door-closing, then it would be substantive.
f.         [EM] if one of the examples of subst (SoL, rules for tolling SoL) => follow state law under YORK
                                                               i.      If invoking state law would be door-closing, then it would be substantive
                                                             ii.      SoL = even though SoL has procedural aspect, the choice of SoL is heavily outcome-determinative = door-closer.  State SoL controls.  YORK
g.        If unclear, use YORK, BYRD, HANNA dicta / outcome-determinative = Sufficient state interest? (YORK) countervailing fed interest? (BYRD) twin aim (to prevent forum-shopping and inequitable administration of the laws)? (HANNA dicta)
                                                               i.       Arg 1. Erie: avoding forum shopping
                                                             ii.      Arg 2. Although state law applied, it is fed judge’s discretion to do XX
                                                           iii.      Arg 3. No fed ct has obligation to follow state law
1.       fed system is an indep sys
h.       must apply state law when failing to apply might produce a different outcome between state and federal courts. YORK
i.         if fed ct in diversity cases decides whether to apply state law to procedural issues, fed ct must consider not only the York outcome-determinative test, but also any countervailing fed policy. BYRD
j.         when applying outcome-determinative test, also consider twin aim of ERIE: to prevent forum-shopping and inequitable administration of the laws. HANNA dicta
k.       example of unclear = laws involving subst and proc = substantive rules can be found in state law on appellate review procedure GASPERINI
l.         what if the substantive state case law is really changing, but state SC has not acted yet? NO, ask for certification
5.       Step 4. REA / HANNA holding
a.        if valid under REA, FR displaces state rules
b.       HANNA 2 [H] (REA) fed ct held to apply FR when a valid FR directly conflicts w state procedural rules when the FR is broadly procedural under SIBBACH and does not “abridge, enlarge, or modify any substantive rights” (28 USC 2072(b))
                                                               i.      = ERIE does not control / otherwise, FRCP is unworkable 
                                                             ii.      (Is this FR valid?) No RF has been found invalid under REA. = Courts have held that FR does not abridge or enlarge a litigant’s substantive rights.  Hence, valid.  SHADY GROVE.
                                                           iii.      HANNA: FRCP valid b.c REA is a fed law in RDA, REA displaces state law as to practice and procedure. ALSO, FRCP has statutory (REA) and constitutional authority (Art III Necessary and Proper cl)
1.       FRCP as promulgated by SC falls under REA b.c implicitly endorsed by Congress 
6.       Post-Hanna, cases where there are divergent ways to tackle these issues
a.        1) is there a FRCP on point? diff from GASPERINI?
b.       2) if yes, then consider REA, if valid under REA, FR displaces state rules
                                                               i.      door-closing or purely procedural?
c.        3) FR in conflict w state rules?
                                                               i.      YES => use FR
 
 ERIE and its progeny
 
1.       ERIE problems arise mainly b.c RDA did not specify governing law for a fed court in diversity jx, when there is no state statute or local usage involved and no fed statute or const at issue = a fed court can hear a case but no constitutional authority to make law
a.        In SWIFT, fed ct can make gen c/l law
b.       In ERIE, follow substantive law of the state court
                                                               i.      To avoid forum shopping
                                                             ii.      But what is substantive?
c.        In YORK, when in doubt for the meaning of substantive law, go for outcome-determinative test
                                                               i.      to prevent forum shopping & vertical uniformity
1.       expansion of ERIE’s constitutional concern to policy of vertical uniformity
                                                             ii.      but, when can apply FRCP?
1.       Fed courts can adopt own rules of procedures under Art 3.2 and NPC
d.       in BYRD, when applying state law to procedural issues, fed ct must consider not only the York outcome-determinative test, but also any countervailing fed policy
                                                               i.      which one is stronger, state interest vs. fed policy?
1.       Often out-of-staters intentionally choose fed ct for diff outcomes
e.        In HANNA, FR should be treated diff from fed procedural practices
                                                               i.      (no FR) modified outcome-determinative test = when applying outcome-determinative test, also consider twin aim of ERIE: to prevent forum-shopping and inequitable administration of the laws
                                                             ii.      (yes FR) fed ct held to apply FR when a valid FR directly conflicts w state procedural rules when the FR is broad procedural under SIBBACH and does not “abridge, enlarge, or modify any substantive rights” (28 USC 2072(b))
1.       when FR is on point w state law, follow horizontal uniformity
f.          
 
 Prior to Erie = RDA and SC interpretation of RDA
 
2.       Rules of Decision Act (§34, Judiciary Act of 1789 => 28 USC § 1652): The laws of the several states, except where the Constitution or treaties of the U.S. or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the U.S., in cases where they apply. 
a.        Under RDA and Supremacy Cl, the (US) Constitution, treaties, Acts of Congress take precedence, when relevant, over state laws in fed and state courts. 
b.       When (US) Constitution, treaties, Acts of Congress do not control, then under RDA, fed courts are bound to follow state laws.
                                                               i.      (CAUTION) RDA is only applicable when the Constitution, fed statutes, or treaties do not apply.
c.        BUT, what does fed ct apply under RDA when there is no controlling constitutional or statutory provision, fed or state (= common law)?
                                                               i.      = Do “laws of the several states” include Common law doctrines within a state?
                                                             ii.      This interpretation changed drastically since ERIE
3.       SWIFT v. TYSON (1842, Story) (overruled by Erie) = whether RDA encompassed gen c.l law: NO
a.       (BG) historically, the era: articulating boundaries for each branch’s power conferred by Art I, II, III
b.       (why all this happened) when no state statute or local usage involved and no fed

rcising diversity jx is adjudicating a state-created right (e.g. right to recover under state SoL), fed ct is “only another ct of the state” where the fed ct is sitting
1.       hence, fed ct cannot afford recovery if such right to recovery is made unavailable by State
                                                             ii.      2) (substantive?) SoL: procedural as well as substantive law
1.       Even though SoL is procedural as it concerns “merely the manner and the means by which a right to recover is enforced”, SoL may be substantive, i.e. “if it significantly affect the result of a litigation for a fed ct to disregard state law (SoL) that would control” had it been in a state ct
a.        e.g. clock-ticking for a reason, like protecting certain rights / (policy) fairness and repose: after certain time, case cannot be brought up
                                                           iii.      (outcome-determinative test) “where 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 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”
d.       (policy) in YORK, ERIE was extended to procedural cases even when fed courts have authority to create governing rules (fed procedural rules under Article III §8) as a policy consideration to prevent forum shopping & uniformity of outcomes in state and fed courts
e.        HERE, D had a chance of winning in fed ct had the state SoL been ignored => SoL was substantive under the outcome-determinative test = If decision affects outcome of case, it is considered a substantive issue on which fed court must defer to state ct
                                                               i.      To prevent parties from gaining advantages only b.c of choosing fed ct (prevent forum shopping)
                                                             ii.      State’s interest were heavily outcome-determinative and bound w state-created rights & Fed interest weak, and little to be gained from district-to-district uniformity
12.    POST-YORK confusion
a.        Though no FRCP was involved in YORK, SC applied the outcome-determinative test as to how to interpret FRCP => Confusion = FRCP inapplicable in fed diversity cases?
                                                               i.      RAGAN (1949): Kansas state law, not Fed Rule 3, determines the time of commencement of action in determining when the SoL period is tolled
1.       Commencement upon service (state) vs. upon filing of complaint (FRCP)
13.    BYRD (1958 Brennan) = turning point = by recognizing countervailing fed policies, refined York emphasis on state law
a.        FACTS/ P (NC indiv) sued for neg in SC fed ct against D (SC corp).  D argued that P was a statutory employee, rather than an indep contractor, thus worker’s comp benefits were P’s sole remedy
                                                               i.      In determining P’s employee status, SC ct decision (judge) vs. fed ct practice (jury)  
b.       RULE: (balancing test) if fed ct in diversity cases decides whether to apply state law to procedural issues, fed ct must consider not only the York outcome-determinative test, but also any countervailing fed policy
                                                               i.      (probability of outcome-determination) judge-jury choice would lead to less certainty than SoL period choice
c.        [H] fed ct policy of jury trial outweighed uniformity of outcome
                                                               i.      GR = fed ct should follow state law when the state law is outcome-determinative “in the absence of other considerations”
                                                             ii.      fed policy here is very strong = constitutional right to jury trial under 7th Amend ~ choosing bt jury and judge
                                                           iii.      state interest weak / state decision was not intended to “bind the def of the rights and duties of the parties”
                                                           iv.       (+) state-fed choice would lead to less likely to determine the outcome
d.       LESSON/ state ct decisions that are basically procedural would not necessarily control even if they are outcome-determinative.  If fed interest is significantly stronger than state interest, then fed policy.
e.        [GN] BYRD did not overrule YORK = better understanding of how to respect state-created rights and duties
                                                               i.      for “state-created rights and obligations”, state law applies to fed diversity cases
                                                             ii.      for procedural matters, a fed diversity court should generally defer to state practice to ensure vertical uniformity
1.       ONLY IF fed policies would be compromised by following state rules, fed court would choose fed procedural rules over a contrary state rule