Is the Rule on Point?

Is the Rule on Point?

A valid Federal Rule of Civil Procedure that covers the disputed point controls in a diversity case even when a state rule points the other way, so long as the Rule is arguably procedural and valid under the Rules Enabling Act. That is the rule of Hanna v. Plumer, and its force depends on the words “covers the disputed point.” Before a court asks whether a Rule is valid, it asks whether the Rule speaks to the question the state rule answers. A Rule that addresses a neighboring subject displaces nothing.

The answer sends the case down one of two paths. If a valid Rule covers the point, it controls under the Supremacy Clause, the state rule yields, and the court never asks whether applying federal procedure would encourage forum shopping.¹ If no Rule covers the point, no “Act of Congress” governs the question, and the court makes the traditional Erie inquiry under the Rules of Decision Act.² A litigant who prefers the state rule therefore argues that the Rule is narrow and leaves the state rule room to operate. A litigant who prefers federal practice argues that the Rule reaches the point. Both arguments are about the Rule’s text, and the court settles them by interpreting it.

Shady Grove Orthopedic Associates v. Allstate Insurance Co. put the first question to work. A New York statute would have denied class action status to certain interest-recovery claims, and the Court held that Rule 23 governs the availability of class certification in a diversity case and so displaced the statute.³ The validity inquiry began only because the Court first found that the Rule answered the question in dispute. A finding of collision opens that inquiry rather than closing the case, because Congress’s power over practice and pleading in the federal courts reaches matters in the uncertain area between substance and procedure that are rationally capable of classification as either.⁴

This unit takes up the threshold question in three steps: the direct collision test, the narrow readings that find no collision, and the broad readings that find one.

The Direct Collision Test

Hanna supplies the model of a collision. Rule 4(d)(1) permitted service by leaving the papers at the defendant’s home with a person of suitable age and discretion, while Massachusetts required in-hand service on an executor.⁵ The Court called the clash “unavoidable,” because the Rule said, “implicitly, but with unmistakable clarity,” that in-hand service is not required in federal courts.⁶ The Rule answered the question whether leaving the papers at the executor’s home sufficed, and the statute answered it the other way. Nothing remained for the state requirement to do alongside the Rule. Two provisions that give opposite answers to the same question collide directly, and a court that applies one must refuse the other.

Walker v. Armco Steel Corp. turned that model into a threshold. The Hanna analysis is premised on a direct collision, so the first question is whether the Rule’s scope is “sufficiently broad to control the issue before the Court,” and only an affirmative answer brings Hanna into play.⁷ A negative answer sends the case elsewhere. If the Rule does not apply or can operate alongside the state rule, no “Act of Congress” governs, and the court conducts the ordinary Rules of Decision Act inquiry under Erie.⁸ The gate exists because displacing state law takes a federal command, and a Rule silent on the point supplies none. The collision test thus chooses the governing law: Hanna’s rule that a valid Federal Rule controls, or Erie’s inquiry into forum shopping and inequitable administration.

The test is an exercise in reading. The court reads the federal text, reads the state text, and identifies the question each one answers. Shady Grove described the task this way: a court must first determine whether the Rule “answers the question in dispute.”⁹ A court that begins by asking which provision embodies the wiser policy has skipped ahead. Questions about state policy belong to the Erie inquiry when no Rule is on point and to the Enabling Act’s limits when one is, although Justice Stevens would let state interests color how the Rule is read, as discussed below. The phrase “direct collision” also has no self-evident edge. It implies that a state rule and a federal rule could both apply and differ without colliding directly enough to require the federal rule, so the cases demand a discriminating judgment about where the line falls.¹⁰

Walker itself shows the failing side of the test, a Rule that sits near the dispute without answering it. An Oklahoma statute required timely service of the summons. The plaintiff in a diversity tort case filed the complaint within the limitations period but did not serve the summons in time, and argued that Rule 3, which provides that a civil action is commenced by filing a complaint, made the suit timely.¹¹ The Court held that in diversity actions Rule 3 governs the date from which various timing requirements of the Federal Rules begin to run, but does not affect state statutes of limitations.¹² The service requirement was an integral part of the state limitations statute, so the Rule and the statute could each control its own sphere. Without a direct conflict, the Hanna analysis did not apply. The Court looked instead to the policies of Erie and Ragan and held that the state requirement controlled. Ignoring it might not create a forum-shopping problem, but it would produce an “inequitable administration” of the law, because a claim concededly barred in state court would go forward in federal court only because of diversity.¹³

What separates Walker from Hanna is the question each Rule answered. In Hanna, the Rule and the statute both addressed what service must be made before the suit may proceed, and they gave opposite answers. In Walker, Rule 3 addressed when a federal action begins for purposes of the Rules’ own deadlines, while the state statute addressed what act stops the state limitations clock on a claim based on state law. Those are different questions, so the shared vocabulary of commencement and service produced no collision. A student who matches nouns across two provisions, instead of comparing the questions they answer, will misjudge the point.

Walker also warns against bending a Rule in either direction. The Federal Rules are not to be narrowly construed to avoid a direct collision with state law. They receive their plain meaning, and a collision that follows from that meaning triggers Hanna.¹⁴ A court may not shrink a Rule because displacement is uncomfortable, and it may not stretch a Rule past its words because federal practice looks preferable. The first error would let Rules yield whenever a court preferred the state rule, which cuts against the uniformity that Hanna named as a shaping purpose of the Rules.¹⁵ The second would displace state law where no federal command appears on the page.

Shady Grove shows plain meaning producing a collision. Rule 23, the Court said, “provides a one-size-fits-all formula for deciding the class-action question” and “unambiguously authorizes any plaintiff, in any federal civil proceeding, to maintain a class action if the Rule’s prerequisites are met.”¹⁶ New York’s § 901(b) tried to answer the same question. It said that Shady Grove’s suit “may not be maintained as a class action” because of the relief it sought.¹⁷ The court of appeals had found no conflict, reasoning that Rule 23 concerns only the criteria for certifying a class, while § 901(b) addresses an antecedent question about which claims are eligible for class treatment, a question the Rule leaves open.¹⁸ The Court treated the two provisions as competing answers to a single question, so the statute could not apply in diversity suits unless Rule 23 was invalid. A state statute need not restate the Rule’s criteria to collide with it. It is enough that both answer whether the suit may proceed as a class action.

The Justices do not run the threshold identically. Justice Stevens, concurring in Shady Grove, stated the same sequence, but he described two ways a Rule may fail to collide. Its “plain meaning” may not come into direct collision with the state law, so that both can operate. Or the Rule, “when fairly construed,” as in Burlington Northern Railroad Co. v. Woods, and read with “sensitivity to important state interests and regulatory policies,” as in Gasperini v. Center for Humanities, Inc., may not collide with the state law.¹⁹ The second route supplies a further reason to find no collision, and the sections on Shady Grove take it up.

The results do not sort themselves neatly. Hanna, Burlington Northern, Stewart Organization v. Ricoh, and Shady Grove found collisions. Palmer v. Hoffman, Cohen v. Beneficial Industrial Loan, Ragan, Walker, and Semtek read Rules not to reach the state rule. The Court has never announced a test, or even hinted at one, for when a Federal Rule collides with a state law. It sometimes reads Rules in implausibly narrow ways to avoid a collision and sometimes seems to think displacement self-evident.²⁰ The next two sections follow each tendency in turn.

Step three carries the weight in a close case, because its answer depends on the comparison of questions in steps one and two and not on whether the provisions share a subject. In Hanna and Shady Grove the provisions could not operate side by side, so the inquiry moved to validity. In Walker they could, so it moved to Erie.

Reading Rules Narrowly

Hanna’s own account of the earlier cases explains the narrowing technique. The Erie rule, the Court said, has never been invoked to void a Federal Rule. In every earlier decision that applied state law against an argument based on a Federal Rule, the holding was that the Rule’s scope was narrower than the losing party urged, so no Rule covered the point and Erie commanded enforcement of state law.²² Each decision therefore looks like state law defeating a Federal Rule but is in fact a ruling about how far the Rule reaches. It belongs to the first step of the framework, and a negative answer there sends the court to the Erie inquiry that governs when no federal directive exists.

Palmer v. Hoffman shows the technique in its simplest form. A respondent defended a jury charge by pointing to Rule 8(c), which makes contributory negligence an affirmative defense. The Court disagreed: Rule 8(c) “covers only the manner of pleading,” and the burden of establishing contributory negligence is a question of local law that diversity courts must apply.²³ Pleading a defense and carrying the burden of proving it are different questions, and a Rule that speaks to the first leaves the second open. The stakes of that distinction appear if one imagines a Rule that did reach the burden. A formal Federal Rule placing on the plaintiff the burden of establishing title would govern the method of proof at trial and so would be arguably procedural. It might not pass the York outcome-determination test, but it would survive scrutiny under the first subsection of the Enabling Act.²⁴ A Rule that reaches the point displaces state law. A Rule that stops short of it does not.

Cohen v. Beneficial Industrial Loan Corp. follows the same pattern. A state statute required a plaintiff suing derivatively for a corporation to post a bond as security for costs, and the federal rule then numbered Rule 23, now Rule 23.1, specified prerequisites for a stockholder’s derivative action. The Court found no conflict, because the requirements of both could be enforced, and a plaintiff could not escape the upfront outlay by resorting to diversity jurisdiction.²⁵ The Rule says what a derivative plaintiff must satisfy. It does not speak to whether the plaintiff may also be required to give security for expenses.²⁶ By the same analysis, Rule 4 prescribes how to serve process on a foreign corporation but is silent on when a foreign corporation is amenable to suit. In each instance, finding the Rule not in point puts the court on the second half of the Hanna test, and state law applies.²⁷

Ragan v. Merchants Transfer & Warehouse Co. applied the same method to Rule 3. The Court held that state law determines when a diversity suit commences for purposes of tolling the state limitations period. The state tied commencement to service of the summons, and because local law created the cause of action, the measure of it was found only in local law, so Rule 3’s filing rule did not displace the state requirement.²⁸ Some lower courts thought Hanna had silently overruled Ragan, but Walker unanimously reaffirmed it on facts indistinguishable from Ragan’s, reasoning that Rule 3 does not speak to state statutes of limitations.²⁹ The Rule and the state service requirement each controlled its own sphere, so the Hanna analysis never began and the Erie inquiry decided the case.³⁰ Walker also left open Rule 3’s role as a tolling provision when the cause of action rests on federal law.³¹

Rule 4(d)(1) in Hanna left no comparable room. No narrowing construction could reconcile a Rule that authorized leaving the papers at the defendant’s home with a statute that required in-hand service.³² A Rule that gives its own answer to the question the state rule answers moves the analysis on to validity. A Rule that answers a neighboring question, as Rule 8(c) and Rule 3 did, sends it back to Erie.

Semtek International Inc. v. Lockheed Martin Corp. extends the technique to Rule 41(b), which provided that an involuntary dismissal “operate[d] as an adjudication on the merits.” The question was whether the Rule barred a renewed action in a Maryland court after a federal diversity dismissal.³³ The Court read the Rule’s “with prejudice” language as preventing refiling only in the same court, with no preclusive effect in other courts.³⁴ Part of its reason was that holding otherwise “would arguably violate the jurisdictional limitation of the Rules Enabling Act” and “would in many cases violate Erie’s federalism principle.”³⁵ Semtek appears to be a special case, driven by the worry that a more literal reading of Rule 41 would give it effect beyond the Enabling Act’s permissible bounds.³⁶

The Shady Grove dissent treated decisions like these as a tradition. Both before and after Hanna, it said, the Court has cautioned federal courts to interpret the Federal Rules with sensitivity to important state interests and to avoid conflict with important state regulatory policies, and the majority had veered away from that approach toward a mechanical reading that was insensitive to state interests and productive of discord.³⁷

Narrowing has a practical logic. A Rule found to cover the point displaces state law outright and raises the Enabling Act’s question whether the Rule abridges a substantive right. A Rule found not to cover the point does neither, and Erie’s concerns remain available to protect state law where the difference would drive forum choice or produce inequitable administration.

The price is predictability. The readings can be strained, and the Court has never announced a test for how narrowly a Rule may be read.³⁸ Rule 3 shows the tension. Ragan suggested that in suits to enforce federal statutory rights, filing the complaint tolls the applicable limitations period, and Walker reserved that question, which leaves the same Rule doing different work depending on the source of the claim.³⁹

On an exam, state the question the state rule answers, state the question the Rule answers, and ask whether they are the same question. When the Rule answers who must plead, or when a federal action begins for the Rules’ own deadlines, and the state rule answers who bears the burden or when a state limitations clock stops, the two coexist and state law governs through Erie. The answer is never that Erie voided the Rule.

Reading Rules Broadly

The narrowing cases are only half of the Court’s record. In Burlington Northern Railroad Co. v. Woods the Court went the other way and read a federal provision to cover a point that a state rule might have shared with it. A federal court of appeals applied an Alabama rule imposing a mandatory 10% penalty on an unsuccessful appellant in a diversity case, and the Supreme Court held that Federal Rule of Appellate Procedure 38 governed instead. The two provisions collided directly, and Rule 38 was a valid exercise of rulemaking authority under the Rules Enabling Act.⁴¹

The collision is not obvious. The two schemes could have been seen to coexist, because the mandatory penalty applied without regard to any judgment about whether the appeal was frivolous and could be analogized to an award of interest that protects the value of the plaintiff’s recovery.⁴² The Court’s answer was that applying Alabama’s mandatory penalty deprived the federal court of the discretion to impose a penalty of less than 10% if it chose to under Rule 38.⁴³ Discretion cuts both ways. A Rule that allows a sanction also allows the court to decline it, and a state rule that requires the sanction in every case answers that question in advance. A court that follows the mandate never exercises the judgment the Rule confers.

Stewart Organization, Inc. v. Ricoh Corp. carried the approach to a federal statute. A defendant sued in federal court in Alabama moved under 28 U.S.C. § 1404(a) to transfer the case, relying on a forum-selection clause. The district court, citing Alabama case law that disfavored enforcing such clauses, denied the motion. The Supreme Court held that § 1404(a), a valid congressional statute governing transfer within the federal system, applied and collided directly with Alabama law, so the district court should have applied the statute.⁴⁴ The statute speaks of the convenience of the parties and the interests of justice and does not address forum-selection agreements. Even so, the Court found in its emphasis on mutual convenience a federal policy favoring enforcement of such agreements, and applied that policy instead of Alabama’s. It could have preserved the discretionary federal transfer regime and given effect to state law by weighing other convenience factors and discounting the contract. It chose a collision.⁴⁵

Ricoh also stated what a collision requires: only that the federal law “be sufficiently broad to cover the point in dispute.” The two provisions need not be coextensive or seriously inconsistent. If a Federal Rule or statute offers a rule of decision, it must be followed.⁴⁶ “Direct collision” still has no self-evident edge, and Burlington Northern shows why. The phrase implies that a state rule and a federal rule could both apply and differ without colliding directly enough to require the federal rule, so the decision required a discriminating analysis of where the line falls.⁴⁷ In both cases the federal provision left a decision to the court’s judgment, and the state rule made the decision in advance.

Shady Grove applied the broad approach to a Rule and answered the argument that a state’s purpose can prevent a collision. The dissent argued that § 901(b) has nothing to do with whether Shady Grove may maintain a class action and affects only the size of the monetary award a class plaintiff may pursue, so Rule 23 and the New York law could coexist.⁴⁸ The Court replied that even artificial narrowing cannot make § 901(b) compatible with Rule 23, because whatever policies they pursue, “they flatly contradict each other.” A Rule susceptible of two meanings, one that would violate § 2072(b) and one that would not, could be read to avoid the conflict. Rule 23 is not, because it “unambiguously authorizes any plaintiff, in any federal civil proceeding, to maintain a class action if the Rule’s prerequisites are met,” and the Court would not “contort its text, even to avert a collision with state law that might render it invalid.” What the dissent’s approach would achieve, the Court added, is not the avoidance of a conflict but the invalidation of Rule 23 under § 2072(b) to the extent it conflicts with the substantive policies of § 901.⁴⁹ The state’s purpose does not vanish. It moves to the validity stage, where the question is whether the Rule regulates the practice and procedure of the federal courts or alters the rules of decision on the merits.⁵⁰

No announced test explains why some provisions are read narrowly and others broadly. The values at stake do not sort the cases. Narrower readings were available in both Burlington Northern and Ricoh, and the appeal penalty did not seem likely to influence the plaintiff’s choice of forum at the outset of the litigation.⁵¹ The direction of travel is still visible. Hanna observed that Erie has never been invoked to void a Federal Rule.⁵² In Shady Grove the plurality held that the two rules regulate the same thing, refused to distinguish class certification from the available remedy, and rejected the premise that reluctance to displace a state rule’s substantive policy should inform whether the federal rule prevails.⁵³ The narrowing cases look like special cases. Semtek turned on the worry that a literal reading would exceed the Enabling Act’s bounds, and without concerns of the kind present in Walker and Semtek, the Court seems likely to keep giving federal procedural provisions a fairly broad interpretation.⁵⁴

On an exam, state the question each provision answers, then ask whether the federal provision gives the court a discretion or an outright authorization that the state rule would replace with a mandate. Where it does, expect a collision, and expect the state’s reason for its rule, even a substantive one, to fail to prevent it. A student who treats the narrowing cases as the controlling pattern will miss that the later decisions find conflict more readily. Finding a collision settles only the first step. The Rules of Decision Act inquiry drops out, and the question becomes whether the Rule falls within the Enabling Act, which bars abridging, enlarging, or modifying any substantive right. If the Rule regulates the practice and procedure of the federal courts, it controls.⁵⁵