Swift v. Tyson
Citation and Court
Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842). United States Supreme Court.
Facts
Tyson accepted a bill of exchange from Norton and Keith in payment for land. Swift, a holder in due course of the bill, sued Tyson when Tyson refused to honor it, claiming the original transaction was fraudulent. The case was in federal court on diversity grounds, and the question was whether federal courts were bound to apply New York courts’ interpretation of common law commercial rules, or could apply their own understanding of commercial law.
Issue
Whether, under the Rules of Decision Act, federal courts sitting in diversity are required to follow state court decisions interpreting the common law, or may instead apply a general federal common law.
Holding
Justice Story, writing for the Court, held that the Rules of Decision Act required only that federal courts follow state statutes, not state court decisions on general common law questions. Federal courts could therefore apply their own view of the general commercial common law.
Rule / Doctrine
Federal courts in diversity cases are not bound by state court interpretations of the general common law; they may independently determine the correct common law rule. State court decisions are not “laws” within the meaning of the Rules of Decision Act. This created a “general federal common law” applicable across commercial and many other fields. Overruled by Erie Railroad Co. v. Tompkins (1938).
Significance
Swift v. Tyson governed federal court practice for nearly a century and created the regime of “general federal common law” in diversity cases. Its overruling by Erie is one of the most consequential shifts in federal courts jurisprudence. Understanding Swift is essential to understanding why Erie was necessary — forum shopping and inequitable administration of the law became severe problems under the Swift regime.