Erie Doctrine
In federal diversity cases, federal courts must apply state substantive law and federal procedural law — there is no federal general common law. Erie Railroad Co. v. Tompkins (1938) overruled Swift v. Tyson (1842).
Elements / Test
Hanna two-track analysis:
Track 1 — FRCP on point:
- Is there a Federal Rule of Civil Procedure that directly answers the question?
- If yes: Apply the FRCP if it is valid under the Rules Enabling Act (§ 2072) — i.e., it does not abridge, enlarge, or modify substantive rights
- FRCP is almost always upheld under this test (Hanna)
Track 2 — No FRCP on point (modified Erie):
- Would applying federal practice significantly affect the outcome of litigation? (York outcome-determinative test, as qualified)
- Would different rules encourage forum shopping or inequitable administration of the law? (Hanna twin aims)
- Is there a strong countervailing federal interest? (Byrd balancing)
- If outcome-determinative and no strong federal interest: Apply state law
Klaxon rule: Federal court sitting in diversity applies the choice-of-law rules of the state in which it sits.
Exceptions and Edge Cases
- Substantive vs. procedural: Uncertain borderline — statute of limitations (York — substantive); burden of proof (Palmer v. Hoffman — Erie-bound); jury vs. judge (Byrd — strong federal interest in 7th Amendment jury right)
- Federal common law still exists for uniquely federal interests: admiralty, foreign affairs, federal government contracts (Clearfield Trust), interstate disputes
- Outcome-determinative test modified by Hanna: Apply only at time of filing to prevent forum shopping, not purely mechanically
Policy Rationale
Prevents forum shopping between state and federal court for different substantive outcomes; ensures equal treatment of litigants regardless of which court they are in; respects state sovereignty over substantive law; corrects Swift regime that created uncertain federal common law.
Key Cases
| Case | Rule |
|---|---|
| Erie Railroad Co. v. Tompkins (1938) | No federal general common law; diversity courts apply state substantive law |
| Guaranty Trust Co. v. York (1945) | Outcome-determinative test — federal court should reach same result as state court |
| Byrd v. Blue Ridge Rural Elec. Coop. (1958) | Strong federal interest in jury trial can override state practice |
| Hanna v. Plumer (1965) | Two-track analysis; if valid FRCP applies, use it; twin aims test for non-FRCP questions |
| Klaxon Co. v. Stentor Electric Mfg. Co. (1941) | Federal court applies forum state’s choice-of-law rules in diversity cases |