The Erie Decision

The Erie Decision

Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), ended the Swift regime in a case that began as an ordinary injury suit. One dark night, Harry Tompkins was walking along the Erie Railroad's right of way near Hughestown, Pennsylvania, when something protruding from a passing train struck him.¹ The railroad was a New York corporation, so Tompkins, a Pennsylvania citizen, sued in the federal court for southern New York, which had diversity jurisdiction.²

Tompkins's choice of courthouse shows the Swift regime from the litigant's side. Pennsylvania law would apparently have treated him as a trespasser and denied him any compensation, while New York law and the federal approach regarded him as a licensee who could recover by showing that the railroad failed to use ordinary care.³ He preferred federal court to state court and New York to Pennsylvania, which made him twice a forum shopper, and both preferences were sound strategy.⁴ Later decisions would name discouragement of forum shopping and avoidance of inequitable administration of the laws as the twin aims of the Erie rule.⁵

The railroad denied liability, and a jury heard the case. The trial judge refused to rule that the applicable law barred recovery, and the jury returned a $30,000 verdict for Tompkins. The Circuit Court of Appeals affirmed without deciding what Pennsylvania law was. It held that the railroad's responsibility for injuries caused by its servants was a question of general law, on which federal courts, absent a local statute, exercise their independent judgment.⁶ Everything therefore turned on which source supplied the rule. If the duty was general law, Tompkins won; if it was Pennsylvania law, he lost.

The Supreme Court's response startled both sides. Neither party had asked it to overrule Swift; each urged its own reading of the doctrine.⁷ The railroad argued that Tompkins's case fell within the narrow category of “local usages,” to which federal courts applied state common law even under Swift.⁸ The Court nonetheless framed the question as whether “the oft-challenged doctrine of Swift v. Tyson shall now be disapproved.”⁹ It answered yes, reversed, declared that “there is no federal general common law,” and remanded to the Second Circuit to determine and apply Pennsylvania law.¹⁰

The rule that emerged is simple to state. Outside matters governed by the Constitution or Acts of Congress, a federal court deciding a state-law claim in a diversity case applies the state's substantive law and does not create federal general common law.¹¹ The state's courts define state-created rights and obligations, and the federal court must respect their definition.¹² State law includes judicial decisions as fully as it includes legislative or constitutional enactments.¹³ A federal judge therefore cannot treat a state supreme court's tort rule as mere evidence of a better rule the judge would prefer. That was the error in the Tompkins litigation: the lower federal courts treated the railroad's duty as a question of general law when it was a question of Pennsylvania law.

The reason behind the holding is a point about who holds lawmaking power. Relying on the principle that the federal government has only limited, enumerated powers, the Court ruled that Congress has no power to declare substantive rules of common law applicable in a state, whether those rules are local in nature or “general,” commercial law or tort law. It added that no clause of the Constitution gives that power to the federal courts.¹⁴ A diversity court has the dispute because the parties are citizens of different states, but the claim itself is created by state law. Article III gives such parties a federal courthouse without giving the court a rule of decision of its own. This constitutional footing is notable, because the Court regularly professes reluctance to decide constitutional questions.¹⁵

The Court also adopted a view of what the common law is. Quoting Justice Holmes, it treated the common law enforced in a state not as a general body of law but as the law of that state, existing by that state's authority.¹⁶ A federal judge who announces a “general” rule about the duty owed to people beside a railroad's tracks is not finding a principle that stands apart from any sovereign. The judge is making law in a field where no clause of the Constitution gives the federal courts power to do so. Applied to Tompkins himself, the holding changed both the source of the rule and the result. On remand, the Second Circuit held that the railroad was not liable, and Tompkins lost his $30,000 award.¹⁷ The accident, the courthouse, and the evidence were the same, and only the source of the duty rule had moved.

Erie does not mean that federal courts never make common law, and the exception marks the exact scope of what the Court forbade. Erie held that there is no general common law and therefore no independent federal interpretation of it. Federal courts still create federal common law when they have the power to do so and a federal interest makes federal lawmaking appropriate.¹⁹ The same day Justice Brandeis announced Erie, he also wrote for the Court in a case applying federal common law.²⁰ Disputes between states over interstate streams show why such a field exists. Neither the Constitution nor any statute supplies the answer, and the Court, of necessity, has developed its own body of law, because it is plainly unsuitable to look to the law of one particular state when two states are in dispute.²¹ The commerce power can supply the footing as well: in a case construing the jurisdictional grant in § 301, the Court relied on the commerce power to create federal common law and then found that the case arose under the law it had just created.²²

These examples differ from Tompkins's claim in the one respect that matters. A railroad's duty to a person beside its tracks is a state-created question, on which no clause of the Constitution lets the federal courts make law. A boundary quarrel between states falls in a field where the Constitution does grant federal power. Federal common law of that second kind is real federal law, which the pre-Erie “general” law was not. It creates federal-question jurisdiction and preempts contrary state law.²³ It supersedes state law, by supremacy, when there is an unavoidable clash.²⁴ Read without qualification, the Court's statement about Congress's power overstates the point, since much federal common law remains in areas where the Constitution grants federal power.²⁵ What Erie removed was the Swift-style power to make substantive rules where the federal government lacks constitutional authority.

Erie also has a limit of a different kind, and it shapes the rest of this chapter. The Court faced an obviously substantive question, the duty of care owed to those walking on a right of way, and did not face the question whether insisting on state substantive law would interfere with uniform federal procedural rules. The Federal Rules of Civil Procedure took effect in the same year, 1938.²⁶ The opinion tells us which law supplies the substantive rule, and it leaves open how federal procedure fits with state law. The paradigm cases are easy: the elements of a state-law negligence claim or the availability of a state-law affirmative defense are substantive, while the number of depositions a party may take or the way a party amends a pleading is procedural. Beyond those examples the substance-procedure line is not obvious, and the Court's later attempts to draw it occupy the sections that follow.²⁷