313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)
In 1918, respondent, a New York corporation, transferred its entire business to petitioner, a Delaware corporation.1 Petitioner contracted to use its best efforts to further the manufacture and sale of patented devices covered by the agreement, and respondent was to have a share of petitioner’s profits.2 The agreement was executed in New York, the assets were transferred there, and petitioner began performance there although later it moved its operations to other states.3 Respondent was voluntarily dissolved under New York law in 1919.4
Ten years later it instituted this action in the United States District Court for the District of Delaware, alleging that petitioner had failed to perform its agreement to use its best efforts.5 Jurisdiction rested on diversity of citizenship.6 In 1939 respondent recovered a jury verdict of $100,000, upon which judgment was entered.7 Respondent then moved to correct the judgment by adding interest at the rate of six percent from June 1, 1929, the date the action had been brought.8
The basis of the motion was the provision in § 480 of the New York Civil Practice Act directing that in contract actions interest be added to the principal sum whether theretofore liquidated or unliquidated.9 The District Court granted the motion, taking the view that the rights of the parties were governed by New York law and that under New York law the addition of such interest was mandatory.10 The Circuit Court of Appeals affirmed, and the Supreme Court granted certiorari, limited to the question whether § 480 of the New York Civil Practice Act is applicable to an action in the federal court in Delaware.11
Whether in diversity cases the federal courts must follow conflict of laws rules prevailing in the states in which they sit?12
The prohibition declared in Erie R. Co. v. Tompkins against such independent determinations by the federal courts extends to the field of conflict of laws. The conflict of laws rules to be applied by the federal court in Delaware must conform to those prevailing in Delaware’s state courts.13
The federal courts must follow the conflict of laws rules prevailing in the states in which they sit.16
Whether § 480 of the New York Civil Practice Act is applicable to an action in the federal court in Delaware?17
The applicability of § 480 depends on the conflict of laws rules of Delaware. The full faith and credit clause does not compel Delaware to apply § 480 if such application would interfere with its local policy.18
The case is remanded to the Circuit Court of Appeals for decision in conformity with the law of Delaware.21