Civil Procedure Class Notes 10/23/03


More easy Erie


All we need to do in easy Erie is figure out what law the federal courts apply.  That’s the law of the state in which they sit, and the law means statutes and court decisions.


Erie itself said that state law on level of duty was substantive and thus must be applied.


Guaranty Trust Co. v. York


This case gives us the outcome-determinative test.  We don’t look at the name given to the rule by the state to determine whether the rule is substantive or procedural.  We want to ensure the case will come out substantially the same whether it is tried in federal court or state court.  The problem is that this test goes too far: a lot of crazy little things can be outcome-determinative!  Recall the reduction of the paper sizes.


If we apply York literally, then the FRCP will kind of wither and die, because virtually every rule will run up against a state rule in conflict.


Post-York, there is confusion among the courts about how to apply or limit the rule.


Eerie Erie


In Ragan v. Merchants Transfer & Warehouse Co., we have a car wreck in Kansas.  The car accident happens, and the filing is made within the state statute of limitations, but the defendant was not served within the statute of limitations.


Kansas has a 2 year statute of limitations, but does the clock start when the lawsuit is filed, or when the defendant is served?


The federal rules are very simple: Rule 3 says that an action is commenced with filing.  So if we follow the federal rule, the lawsuit is timely, and we’re good to go.  On the other hand, Kansas has a statute that says that an action is commenced at the date of service.


If we apply the outcome-determinative test to this, the outcome will definitely be affected if we use federal instead of state rules.  Do we follow the state rule in this case?  According to York, we must, and that’s what the Supreme Court holds in Ragan.


But wait, it gets better!  In Cohen v. Beneficial Indus. Loan Corp., which was a shareholder derivative action, a New Jersey statute says that you must post a bond to cover fees.  The idea of the statute is to discourage frivolous derivative actions.  The federal rule, on the other hand, prescribes how derivative actions will be handled in the federal courts.  But there’s no bond.


The federal rule has no bond.  The New Jersey statute says you have to use a bond.  Is this outcome-determinative?  Yes!  Thus, the Supreme Court holds that New Jersey state law trumps FRCP Rule 23.1. 


The third case in the trilogy was Woods v. Interstate Realty Co.  Under Mississippi law, you can’t sue in Mississippi as a foreign corporation unless you designate an agent for service of process in Mississippi.  Under federal rules, there would be no problem for a Tennessee company to sue in Mississippi without any such agent.  The Supreme Court held that the state statute trumps the FRCP again!


In Erie, Justice Reed admonished us that “no one doubts federal power over procedure”.  However, in practice, when we applied the outcome-determinative test, the FRCP got eaten up by competing state laws!  Our rules are getting killed off!


Thus, the stage is set for a new rule, which we get in…


Byrd v. Blue Ridge Rural Electric Cooperative


What are the facts here?  We are in South Carolina, and we have a hurt worker.  The worker is from, let’s say, North Carolina.  Blue Ridge is in South Carolina.  Mr. Byrd gets fried, and so he sues.  That’s fried, not fired.  Like zapped.


Byrd sues for his injuries in federal court in South Carolina.  What’s the problem with his suing Blue Ridge?  It’s not clear whether Byrd is an employee, as far as the statute goes, or not.


Blue Ridge hired an independent contractor who in turn hired Byrd.  Byrd is an employee of the contractor.  Blue Ridge wants to argue that Byrd is more or less just like an employee in terms of the worker’s comp statute.


The worker’s comp statute says that employers pay for the worker’s comp system.  Employees get benefits for on-the-job injuries, and in return, employers get immunity from tort suits by employers.


Thus, if Blue Ridge can establish that Byrd is a statutory employee, his suit is barred.


What’s the Erie issue?  It’s a “who gets to decide” question.  The legal issue is whether he’s an employee or not.  South Carolina says that the judge decides who is an employee and who isn’t.


Why might they make this policy?  The judge might be more experienced in making such determinations.  What might the jury do?  They might be biased against the employer.  The hurt employee is quite sympathetic.  The jury might sort of nullify.  There also may be more consistency over time if you let the judge decide.


On the other hand, under the Seventh Amendment, suits at common law must be tried by jury.  This doesn’t exactly say that a jury gets to decide who is an employee under South Carolina law.  Does the Seventh Amendment require that a jury decide this issue?  No.  The Court tells us that it isn’t a constitutional issue.  Yet, the rationale used by the Court is the Seventh Amendment.


What does the Court really tell us?  What is it about the Seventh Amendment that’s important?  It’s not unconstitutional to run things in South Carolina the way they’re run.  What’s the deal?


In the Eerie Erie three, we had several easy conflicts where the state rule won out.


The court says that the federal courts are run by rules that are under the influence of the Seventh Amendment, but not controlled by it.


The result of this case is that the federal court will allow the jury to determine the immunity issue.  The reason isn’t that this is required by the Seventh Amendment, it’s just that it’s influenced by the Seventh Amendment.


So what’s our new test?  It’s not just “under the influence”, but also, it’s uncertain whether a different result would follow from applying the federal rule instead of the state rule.


What happens if we apply York to this case?  Brennan thinks that using the federal rule instead of the state rule is not outcome-determinative, and thus we would use the federal rule.  We only use the state rule if it’s outcome-determinative.  This ruling could have been fit into the York rule easily, but the Supreme Court wants to announce a new rule.


Instead of the outcome-determinative test, now we have…


The Byrd Balancing Test


This test is derivative of the earlier test.  There are three questions that you ask when you deal with Erie questions:


1.     Is the state rule bound up with rights and obligations?


This is the substantive question.  In Erie, the state rule had everything to do with rights and obligations, so the state rule applied.


If the answer is yes, state law applies.


If the answer to this first question is no, however, you ask the second question.


2.     Will applying the state rule dictate the result of the case?


This comes out of York.  In York, the answer was yes.  If the state rule is outcome-determinative, we must ask a third question:


3.     Are there countervailing considerations?


For example, what is the interest in the federal forum as opposed to the state forum?  Compare this to the issues of personal jurisdiction and the balancing tests you find there.


Let’s apply this to Byrd!


In Byrd, the state rule is not bound up with rights and obligations; it is not a rule that is bound up with the substantive law of the state of South Carolina.  The rule seems to be part of the “form and mode” of enforcing immunity rather than determining what immunity rights are.


Will applying the state rule dictate the result of Byrd?  Brennan says that if outcome were the only consideration, there would be a strong case for the federal courts following the state rule.  However, we check out the third question.


Is there any countervailing federal consideration that outweighs the state rule?  The Seventh Amendment wins out here!  We won’t “disrupt” the regular federal method of dividing up power between judges and juries.


Wright described this decision as the most “Delphic” of the Supreme Court’s major Erie decisions.


Fairman says that the main advantage of Byrd is that it gives us a chance to consider the federal forum’s interest in running things a certain way.  This case helps us to preserve the rest of the federal rules and stop the killing off of all the FRCPs!  It stops the erosion of the Eerie Erie Three!


An example of Byrd


A guy flies a plane from Illinois to Florida to South Carolina to Tennessee where he crashes.  The pilot sues in South Carolina in diversity.  The company is from Kansas.  The claim, however, is based on the Tennessee Wrongful Death Act because that law is favorable to him in his recovery.  But South Carolina had a “door-closing” statute that said you can only sue corporations in South Carolina state courts by state residents or others when their cause of action arises within South Carolina.  South Carolina says that the cause of action arose in Tennessee because that’s where the crash occurred.


The question is whether or not to apply the South Carolina “door-closing” statute.


1.     Is the South Carolina bound up with rights and obligations of the Tennessee statute?  No, because there’s no way that the South Carolina legislature could have been thinking about Tennessee law when they were writing their statute.

2.     Will applying the South Carolina statute dictate the result of the case?  Absolutely.

3.     Are there any countervailing federal considerations?  As a matter of constitutional law, citizens of different states are allowed to sue each other in federal district courts under diversity.  South Carolina’s law runs contrary to our principle of diversity.  Therefore, our lawsuit is going forward.


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