Applicable Law (Erie)
Which law to apply in suits that rest upon diversity?
Rules of Decision Act; “the laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decisions in trials at common law in the courts of the United States in cases where they apply”
Early law; Judges were confused and split on what exactly this rules of decision meant. In Swift v. Tyson, judge Story states that under the judiciary act,
“general” matters were to be decided by federal courts making a federal common law
the ‘laws’ in the rules of decision act were not to include state common law.
Problems with early law
i. Undermined state autonomy
ii. Despite hoping for a uniform federal common law, still not uniform across districts
iii. Forum shopping
1. Because federal common law could be more favorable, made litigants forum shop to get in/out of the system. Black & White Taxi Cab
iv. No constutional power granted to the courts to have general law making authority.
The modern law; Erie Railroad v. Thompkins over rules Swift
“there is no federal common law”, state common law should govern where Congress has not said otherwise.
i. Rationale;
1. Violates Constitution. No express authority listed, but likely 10th amendment and state powers,
2. Places undue power in the federal judiciary.
3. Lack of uniformity and resulting discrimination.
Federal courts sitting in diversity of citizenship cases must rely upon state law in determining substantive rights, even in equity matters.
i. Erie gave rise to an inherent tension by putting forth the principle that “state substantive law” and “federal procedural law” should govern state law actions being litigated in federal courts.
How to define substantive law; Old Approaches
i. Outcome determinative; If following state law will significantly affect the outcome of the litigation. Guaranty Trust Co. v. York. (SOL)
1. Rationale, trying to make the case come out the same way as if it was in state court.
2. Very hard test to use. Almost anything can be outcome determinative. Failure to file motions on time can be determinative.
ii. Interest balancing approach; Weighs three factors.
1. The relation between the state rule and the underlying state right
2. the interests of the federal judicial system
3. the outcome determination of each choice. Byrd v. Blue Ridge Rural Electric Cooperative (a jury will decide the question)
4. Also a very hard test to use; weighing nonequivalent interests. Not an objective standard.
Modern approach under Hanna v. Plumer.
i. Two aims;
1. discouragement of forum shopping
2. Avoidance of inequitable administration of the laws.
ii. Two stage analysis
1. First, it must be determined that whether there is any direct conflict between the laws.
a. Some statutes can be read very narrowly to avoid a conflict, as in Walker v. Armco Steel, however this case is likely an outlier.
2. Second, if there is a conflict, the source of the federal rules should be considered.
a. Will to trump
i. Federal constitution
ii. Acts of Congress
iii. Federal rules FRCP from the Rules Enabling Act
b. Apply Hanna Test
i. Judge made federal procedural rules are judged
ii. Must weigh factors towards discouraging forum shopping and avoiding inequitable administration of the laws.
Determining which state’s law controls
i. In diversity cases, a court applies the law of the state in which it sits.
1. When it is unclear which law to apply, the conflicts principles of the local state should apply.
How to interpret the applicable state law.
i. Federal court should give proper regard to precedent, but is not bound to follow.
1. For example; If he feels that the state law is point towards over-ruling a certain idea, but a single case has yet to do this. Mason v. American Emery Wheel Works
2. If the state’s highest court hasn’t made a ruling on the issue, can petition for an answer on how they would likely rule.
Certain exceptions to the rules of Erie. Federal common law in the federal courts.
i. Anti-trust
ii. Patents
iii. Foreign relations
iv. Liability of a tort-feasor resulting from a government K is governed by federal common law Boyle v. United Technologies Corp.
Federal common law in state courts.
i. When litigating a federal claim in state court, must apply federal common law if it exists Dice v. Akron, Canton & Youngstown R. Co.
Joinder of Claims FRCP 18
Under early common law, joinder of separate claims was permitted only if all claims were in the same form of action (ie trespass on the case)
Modern joinder under FRCP 18(a) abolishes all restrictions on the joinder of claims. A party may join as many claims as she has against an opposing party, regardless of subject matter.
Multi-party limit. There are no restrictions when it is a singled Π against a single Δ, however if there are multiple parties at least one of the claims must arise out of the same transaction and must involve a common question of law.
i. Example; P sues D1 and D2 in tort for a car crash. The same transaction is involved. P may also join a separate claim against D2 for a K claim completely unrelated.
Court can always order separate trials.
SMJ must also be satisfied.
Claims need NOT be related. Can sue for K, tort, etc.
Example; Π sues Δ in a K action. He can join an unrelated tort action against Δ.
i. Note however that there must be a federal question or a the parties are diverse.
ii. Note also that for the amount in controversy for a diversity case, you aggregate all of the claims Π asserts a
relief asserted by or against the party jointly, severally or in the alternative.
ii. The persons to be joined must assert some right to relief arising out of the transaction or occurrences.
1. Not clear what the same transaction or occurrence is. Seems to be defined in terms of judicial economy and convenience.
iii. A question of law or fact common to the parties.
1. The common issue need not be contested.
2. Judges also given some lee way in deciding what is a common law or fact common to the parties.
Requirements somewhat open ended, refer to rationale behind the rule in balancing the factors.
As long as the requirements are met, a party may assert as many unrelated claims as she wants against the parties
i. Example; Π sues Δ1 the driver and Δ2 the passenger. Also wants to sue under a K claim against Δ2. As long as Δ2 was properly joined in the first place, this is OK.
For all parties joined, there must be independent subject matter jurisdiction! You can NOT use supplemental jurisdiction under §1367
Compulsory joinder FRCP 19 is required of a party that has a material interest in the case and whose absence would result in substantial prejudice to him or to other parties. Provident Bank v. Patterson. (can’t go forward w/out him) Absence threatens the non party’s ability to prosecute or defend a subsequent action.
Two categories, that lie on a continuum.
i. Necessary 19(a); party should be joined if possible.
ii. Indispensable 19(b); case should be dismissed if the party can not be joined.
Factors to weigh in deciding if necessary/ indispensible.
i. Extent to which any judgment rendered would effect the interest of the asbent party
ii. Extent to which such prejudicied could be lessened or avoided by appropriate court action.
iii. Whether relief rendered w/out the absent party would be adequate
iv. Whether Plaintiff has any other adequate remedy if the action is dismissed for nonjoinder of the absent party.
Failure to join all necessary parties can lead to a ction to dismiss under FRCP 12. However, failure to object to nonjoinder of a necessary party does not lead to a waiver. Nonjoinder may be raised at any time. Failure to raise in a timely manner will be a factor the court considers.
Common necessary parties
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