Why Rules Get Special Treatment

Federal Rules Versus State Law

Why Rules Get Special Treatment

When a Federal Rule of Civil Procedure and a state rule give different answers to the same question in a diversity case, the Federal Rule applies if it is arguably procedural and valid under the Rules Enabling Act. That is the holding of Hanna v. Plumer. The statement looks modest, but it changes where the analysis begins. In an ordinary Erie problem, the court chooses between state law and a federal practice that rests on no enacted text. When a Federal Rule is in play, the court never faces that open choice.

The difference lies in what stands on the federal side of the conflict. Where no federal directive is on point, the Rules of Decision Act, as Erie reads it, directs the court to apply state law when failing to do so would invite forum shopping and yield markedly disparate litigation outcomes.¹ Forum shopping means litigants choosing federal court to obtain a more favorable rule. A judge-made federal practice carries no written instruction, so the court must weigh the competing interests itself. A Federal Rule has a different source. It is a written directive issued under power Congress delegated, so an enacted text has already made the choice between federal and state procedure, and the court has been instructed to follow it.² The court's remaining work is narrower: it asks whether the Rule reaches the dispute and whether the Rule falls within the delegation.

The same logic governs class actions. In Shady Grove Orthopedic Associates v. Allstate Insurance Co., a New York statute would have denied class status to certain interest-recovery claims. The Court held that Rule 23 governed certification in federal court and displaced the statute, because Rule 23 deals with practice or procedure and does not abridge, enlarge, or modify a substantive right.³ Hanna and Shady Grove thus point to one ordered sequence of questions, not to a free-floating weighing of state and federal interests. This unit builds that sequence in three steps: the danger that made Hanna necessary, Hanna itself, and the framework that results.

The Threat to the Rules

Congress gave the federal courts a written procedure of their own in the Rules Enabling Act, which provides that the Supreme Court shall have “the power to prescribe, by general rules, the forms of process, writs, pleadings, and motions, and the practice and procedure of the district courts of the United States in civil actions.”⁴ A Rule that exercises this power must deal with practice or procedure and must not abridge, enlarge, or modify a substantive right.⁵ Before the Federal Rules were promulgated in 1938, the Conformity Act of 1872 regulated practice in the federal courts.⁶

Erie R. Co. v. Tompkins arrived the same year. It overruled Swift v. Tyson and applied the Rules of Decision Act, which makes “the laws of the several states” rules of decision in federal trials “in cases where they apply,” to require state law on substantive questions.⁷

Guaranty Trust Co. v. York then changed the question. York taught that sorting an issue into “substance” or “procedure” is simplistic and often fails, because that “characterization” too easily avoids state law where Erie's underlying policies call for it.⁸ In its place, York asked: “does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?”⁹

The Enabling Act asks about a different thing. Its test comes from Sibbach v. Wilson & Co.: “whether a rule really regulates procedure,—the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for disregard or infraction of them.”¹⁰ That test examines the nature of the rule, while York examined the consequences of applying it.

A consequences test looks backward from the end of the case, and once a case is lost, almost any procedural difference can be said to have changed the result. A test that broad cannot sort procedure from substance, because it condemns nearly every federal practice that differs from a state one. Ragan v. Merchants Transfer & Warehouse Co. shows the effect. A Kansas diversity plaintiff filed a complaint within the two-year limitations period but served the defendant after it expired, so the action was timely under the Federal Rules and time-barred under state law. The Court followed the state rule, reasoning that a plaintiff should not be able to maintain in federal court a case that state court would have dismissed.¹¹

Carried to its end, that reasoning would let the Rules govern a diversity case only where no state rule differed. A litigant who followed a Federal Rule could never know whether some state requirement would later override it, and the uniform procedure Congress authorized would erode one case at a time.

Byrd v. Blue Ridge Rural Electric Cooperative, Inc. replaced the single outcome test with a balancing test, but the balance had no scale. “There is no way to say with assurance in a particular case that the federal interest asserted is more or less important than the interest in preserving uniformity of result with the state court.”¹² Commentators describe that balancing test as plagued by vagueness and nonobjectivity. Against that background, Chief Justice Warren's opinion in Hanna has been praised for finally providing a simple, clear test, one that also safeguards the Federal Rules from encroachment in diversity cases by conflicting state practices.¹³

The danger became concrete in Hanna v. Plumer, where the executor answered the plaintiff's reliance on Rule 4(d)(1) with a syllogism built from York. Erie, as refined in York, requires a federal court to apply state law whenever applying federal law instead would change the outcome. Following the Massachusetts statute would end the case in the executor's favor, and following Rule 4(d)(1) would let it continue. So Erie demands the state statute. The Court conceded that the syllogism “possesses an appealing simplicity,” and then found it “for several reasons invalid.”¹⁴ If the syllogism were right, a litigant who followed Rule 4 could lose the case for following it, and no one could safely rely on any Rule in a diversity case where a state rule differed.

Hanna v. Plumer

Hanna v. Plumer asked a narrow question: in a diversity action, must service of process follow the manner prescribed by state law or the manner set out in Rule 4(d)(1) of the Federal Rules of Civil Procedure?¹⁶ The Court answered in two stages. It first doubted that Erie would have required the state rule even if no Federal Rule existed. It then held, as the actual ground of decision, that a valid Federal Rule covering the point controls without regard to Erie's outcome-based refinements.¹⁷ The facts show why the Court could say both things about one dispute.

Hanna, an Ohio citizen, sued in the District of Massachusetts over an automobile accident in South Carolina allegedly caused by a Massachusetts driver who had since died. The defendant was the driver's executor, also a Massachusetts citizen. Copies of the summons and complaint were left with the executor's wife at his residence, which Rule 4(d)(1) (now Rule 4(e)(2)) permits.¹⁸ The executor invoked a Massachusetts statute under which an executor need not answer a creditor's action unless, within a year of giving bond, the writ was served by delivery in hand, service was accepted, or a notice was filed in the registry of probate.¹⁹ The lower courts measured the service against that statute and ruled for the executor, and the Supreme Court reversed.

The Court's first response was that the executor's outcome-determinative argument was shaky on its own terms. The outcome-determination test “cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.”²⁰ Measured against those aims, the difference between in-hand service and service at the dwelling was slight. Choosing the federal rule would have a marked effect on the outcome, but “the difference between the two rules would be of scant, if any, relevance to the choice of a forum.”²¹ Hanna, in choosing her forum, faced no state rule that would wholly bar recovery; adherence to the state rule would only have altered the way process was served. Nor does letting the executor's wife stand in for the executor alter the mode of enforcing state-created rights in a fashion “substantial” enough to raise the equal protection problems that Erie alluded to.²²

This first half of the opinion is dicta, meaning reasoning a court offers without needing it to decide the case. Rule 4(d)(1) was an enacted Federal Rule, so the dispute was a conflict between state law and a Federal Rule, not between state law and a judge-made federal practice, and the twin-aims analysis was unnecessary to the result.²³ The first half still matters, because it states the test that governs where no federal directive is on point. The holding, however, comes from the second half.

There the Court identified “a more fundamental flaw” in the executor's syllogism: the assumption that Erie supplies the test for the validity, and therefore the applicability, of a Federal Rule.²⁴ Erie had never been used to void a Federal Rule. In earlier cases where state law prevailed over an argument based on a Rule, the holding was not that Erie displaced the Rule but that the Rule was narrower than the losing party urged. No Rule covered the point, so Erie commanded state law.²⁵ Hanna presented the opposite situation, because Rule 4(d)(1) says, “implicitly, but with unmistakable clarity,” that in-hand service is not required in federal courts.²⁶ No gap existed for state law to fill, and only two questions remained: whether the Rule is valid under the Enabling Act and whether it is valid under the Constitution.

The two situations get different tests because they ask the court to do different things. The Erie test and the Enabling Act test need not be identical, because they were designed to control very different decisions.²⁷ Where no Rule applies, the court makes the “typical, relatively unguided Erie choice” and weighs the policies itself. Where a Rule applies, the court “has been instructed to apply the Federal Rule, and can refuse to do so only if the Advisory Committee, this Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions.”²⁸ A test that let any differing state rule displace a Federal Rule would reduce those three layers of judgment to nothing. That is why the Court said that a Rule forced to cease functioning whenever it alters the mode of enforcing state-created rights would “disembowel” either the Constitution's grant of power over federal procedure or Congress's attempt to exercise that power in the Enabling Act.²⁹

Rule 4(d)(1) cleared both hurdles. Under the cases construing the Enabling Act, it “clearly passes muster”: it prescribes how a defendant is notified that suit has been instituted, so it relates to the “practice and procedure of the district courts.”³⁰ On the constitutional side, the provision for a federal court system, augmented by the Necessary and Proper Clause, carries with it congressional power over practice and pleading, including matters in the uncertain area between substance and procedure that are rationally capable of classification as either.³¹ The Court therefore held Rule 4(d)(1) valid and controlling.³² Later sections of this page take up coverage and validity in detail.

The line Hanna draws is clearest against a conflict of the kind that preceded it. In Guaranty Trust Co. v. York, plaintiffs in a diversity class action for breach of trust urged the federal equitable doctrine of laches to govern the timeliness of their suit, and no Federal Rule or statute required it.³³ The choice was between state law and a judge-made federal practice, so the twin aims governed, and Hanna read York in light of those aims instead of overruling it.³⁴ A limitations period fits that inquiry well, since a state rule that can bar recovery altogether is the kind of difference a plaintiff weighs when choosing a forum, while the service rule in Hanna merely altered how process was delivered.³⁵

To decide which half of Hanna governs a problem, ask whether an enacted federal directive covers the disputed point. A plaintiff served under Rule 4 in a way a state statute forbids stands where Hanna stood, and the live questions are whether the Rule covers the point and is valid. If the Rule does, it controls under the Supremacy Clause, and Erie principles never come into play.³⁶ A federal court that has simply been in the habit of applying laches, with no Rule behind the habit, stands where York stood, and the twin aims decide whether the state limitations period controls.

The Resulting Framework

In Shady Grove, Justice Scalia compressed the sequence Hanna established into three sentences. The court must first decide whether the Federal Rule answers the question in dispute. If it does, the Rule governs despite the state law, unless it exceeds statutory authorization or Congress's rulemaking power. And “[w]e do not wade into Erie's waters unless the Federal Rule is inapplicable or invalid.”³⁸ Those sentences fix an order of questions, and the order carries the doctrine. The Rules of Decision Act sends federal courts to state law except where the Constitution, treaties, or federal statutes otherwise require or provide.³⁹ When a Federal Rule covers the matter, though, the Act's inquiry “by its own terms does not apply,” and the Rules Enabling Act controls instead.⁴⁰ Asking about coverage and validity first therefore reserves the unguided Erie choice for situations where Congress and the rulemakers have said nothing.

Step three rests on supremacy. A Federal Rule that stays within the Enabling Act's limits displaces conflicting state law for the same reason a constitutional federal statute does: valid federal law is the supreme law where it applies.⁴¹ The sequence therefore ends once that step is reached. Whether the state rule is labeled substantive, and whether the choice would change who wins, add nothing, because the federal provision has already answered the question.⁴² The opinions in Shady Grove share this sequence even where they disagree about how to run it. The dissent states it in nearly the same terms: a Rule that controls an issue and directly conflicts with state law applies in diversity if it is consonant with the Enabling Act, and if no Rule or statute governs, the Rules of Decision Act and Erie control.⁴³ Justice Stevens's concurrence adds that the second step may bleed back into the first, because a Rule that appears to abridge a substantive right must be read, where reasonably possible, to avoid that result.⁴⁴ The later sections take each step in turn.

A Rule can look relevant without answering the question the state rule answers, and that gap is the first way out of the sequence. Rule 3 provides that an action is commenced by filing a complaint, yet in Walker v. Armco Steel Corp. a plaintiff who filed within the limitations period but served the defendant after it expired was held to a state rule that treated service as the event stopping the clock.⁴⁵ Rule 3 gives a starting point for measuring time periods in the federal suit, and it says nothing about when a state limitations period is tolled. No Federal Rule covered the question, so the court went directly to the unguided Erie choice, which pointed to state law. The result matches Ragan's, but the route differs, because Walker reads Rule 3 narrowly and so finds no collision.

Shady Grove shows the opposite exit. Whether a class can be certified may decide the whole case, and the plurality admits that the choice encourages forum shopping.⁴⁶ Yet Rule 23 answers the certification question and is valid, so it controls and Erie's twin aims never enter.⁴⁷ The dissent would have avoided the collision by reading Rule 23 more narrowly, which would have returned the case to the Erie analysis, where the outcome and forum-shopping effects favor state law.⁴⁸ Outcome sensitivity thus appears on both sides of the line. What separates the two exits is whether the federal provision answers the question the state rule answers. A student who opens with the question whether the choice would change the result has started at the Erie stage, which a court reaches only after the Rule has been found inapplicable or invalid.⁴⁹