Civil Procedure Class Notes 10/22/03


Still in Erie


Wright thinks it’s hard; Yeazell thinks it’s not so hard.


Erie, the case, isn’t really difficult at all.  It’s all about interpreting the phrase “the laws of the several states”.  Justice Story said that “laws” meant “statutes”.  This was overturned by Erie: from now on, in diversity cases, the federal district court will apply the law of the state in which the court sits, and “the law” includes both statutes and court decisions.


Brandeis said that part of the point of Swift was to promote uniformity in law.  It turned out there was actually less uniformity.


Brandeis also said that Swift was discriminatory.  Take, for example:


Brown & Yellow Taxicab Co. v. Black & White Taxicab Co.


Brown & Yellow wants an exclusive contract to serve the railroad.  Black & White tries to bust in, knowing that the contract was no good under Kentucky common law.  So Brown & Yellow reincorporated out-of-state in order to get diversity jurisdiction and the benefit of “federal general common law”, which would hold the contract in question valid.


This is bad forum shopping!  This is unfair!  We don’t want this to happen anymore.


What’s unconstitutional?


Brandeis also says that something is unconstitutional.  But what?   Is the RDA unconstitutional?  Nope, the decision says it’s still good.  We still have it more or less unchanged today.


Swift, the case, was an unconstitutional result.  We don’t typically see the court go out of its way to declare something they previously did as unconstitutional, but Brandeis does go out of his way to try to ground Erie in constitutional analysis.


Brandeis declares that there is no “federal general common law”.  Congress can’t dictate common law to the states.  But is this true today?  Arguably not.  Take Taft-Hartley, for example.  It is a command to the federal court to develop a general federal common law.  But doesn’t this case say that such a thing doesn’t exist?


We do have federal common law.  Congress can easily use legislative tools to change the substance of state laws.  All they have to do is coerce states (by withholding funds, for example) to adopt statutes that Congress prefers.


We no longer have to worry about Story’s limited view that statutes are the only thing we mean when we talk about “the law”.


Erie as theory


Brandeis suggests that Swift was based on a philosophy of Natural Law.  What Brandeis represents, on the other hand, is a legal realist perspective: “There is no law without some enforcing authority.”


But how does it all work?  In most cases, this won’t be very difficult.


A and D get into an accident in Minnesota.  D was driving O’s car.  A sues D.  D wants to do a third-party claim against the owner.  Minnesota allows it, though it doesn’t have a statute, but most states don’t.  What shall we do if we’re in federal court?  We have to use Minnesota’s law.  This is pretty simple.


But we’ve got problems!  The Klaxon rule says that the federal court applies the “choice of law” law of the state in which it sits.  This is a variant of Erie.  If the court really wanted uniformity, this is where it screwed up.  If there was one set of rules on what law should be applied, it would give us a much greater sense of certainty.  Recall Piper and its complications.


Erie says that you must apply the “law of the state”.  But how do you determine what state law is?  If there’s a statute, that’s what you apply.  What if there is no statute?  Where do you turn next?  We look at the case law of the highest court in that state.  Even if they’re wrong in the view of the United States Supreme Court, there’s nothing the federal courts can do about it.  That’s federalism for ya.


Look for statutes, then for State Supreme Court cases.  But it’s probably not usually going to be that easy.  If there isn’t a definite ruling from the State Supreme Court, the federal court must make their Erie “guess”: they must take a stab at predicting what the State Supreme Court would do.  There are two ways to do this:


1.     Look at intermediate appellate or state district courts.

2.     Ask the State Supreme Court directly by “certifying a question” of state law.  Most state courts can accept certified questions.  (This is rare, because it is discretionary.)


This is where Erie questions typically come up today.


But…Justice Reed says that though the line between substantive law and procedure is “hazy”, no one doubts that federal courts should be able to make their own procedure.  Or do they???


It’s hard to define the line between substantive law and procedure.


Guaranty Trust Co. v. York


Here, we’re talking about a statute of limitations which says “you can’t bring such-and-such an action after such-and-such a date.”  That sounds quite procedural, but it turns out that it’s not.


York sues Guaranty Trust for a trust thingy.  York is a beneficiary of a trust administered by Guaranty.  There’s a bunch of confusing stuff.


This suit was filed in New York federal district court.  Don’t we use the FRCP?  If the Federal Rules don’t govern the federal courts, what do they cover?  But we’re not making a blanket decision about whether the Federal Rules apply.


In this case, we are looking at the statute of limitations.  The defendant says we should apply the New York statute of limitations, which would result in the defendant winning.  This is an all-or-nothing deal.  If the statute of limitations applies, York’s too late.  If it doesn’t, York can go ahead.


York’s argument is that their suit was on the “equity side” of federal courts.  The RDA says that it only applies to actions at common law and not actions at equity.  Today, there’s just one cause of action.  There used to be actions at law and actions at equity.  In the old days, statutes of limitations applied to actions at law and not to actions at equity.  So York says that the statute of limitations doesn’t matter because I’m not suing at common law!


The lawsuit is filed in the Southern District of New York.  Guaranty Trust moves for summary judgment and they get it.  York appeals to the Second Circuit.  The Second Circuit reverses, buying into the plaintiff’s argument.  Guaranty appeals to the Supreme Court, and it reverses again, saying that we apply the state statute of limitations even though the action is at equity.


The holding of the case is: Federal courts sitting in diversity must apply state statutes of limitations.


That’s all well and good and pretty simple, but that’s not the complicated part.


Why, after Erie, is there even a question about applying this standard?  Why did we have to have another Supreme Court case about this?  Why would the litigants even have to raise this issue?


Is this really an Erie case?  It could be argued that RDA does not specifically apply to equity cases.


Also, this case involves the application of a state statute which even under Swift was always applied.


Some people call this the York doctrine, rather than the Erie doctrine.  They argue that York creates the mess.  This is what is going to send us down the road to repeated Supreme Court cases where something looks procedural, sounds procedural, but it’s insisted that it’s not procedural.


How do we determine under Erie (or York) whether something is substantive?  We look at the “outcome-determinative” standard.


We don’t look at how states characterize their law.  We don’t go by the labels that states themselves supply.  Just because something is, for example, in the New York Code of Civil Procedure doesn’t mean it’s procedural.


We also look at whether a statute deals with “manner and means of recovery” or whether it deals with a “matter of substance”.  We want the outcomes in state or federal court to be substantially the same.  We want diversity cases to be dealt with the same way in state and federal courts to discourage forum shopping, which we don’t like.


Yeazell gives the example of paper size.  Is this procedural?  Not by the outcome-determinative test because if you file on the wrong size paper, your complaint will get dismissed.  That is surely outcome-determinative!!!  This seems ridiculous, but that’s the rule according to York.


Now you see why Erie is a mess.


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