Concept
Worked Applications
Erie analysis when no federal rule controls
Worked Applications
Every problem in this unit runs the same three questions in the same order, and each ends at the question that decides it. The first asks whether a valid Federal Rule or federal statute covers the point; if one does, it controls over state policy, and Erie goes no further.1 The second asks whether ignoring the state rule would change the outcome as a plaintiff would see it at filing, so that plaintiffs would be drawn to the federal courthouse. The third asks whether a federal interest of the kind recognized in Byrd outweighs the state's interest in having its rule applied.2 One idea sorts the results. A rule that can end or reshape a claim goes to state law, because a lawyer can see its effect before filing and the federal courthouse would otherwise reward the choice of forum. A rule that governs how a federal court conducts its own trial stays federal, because the federal system has a strong interest in running its own courtroom and the rule does not heavily determine who wins.
Rules That Follow State Law
Statutes of limitations show step two doing the work. Where Congress has enacted no applicable limitations period, the Erie inquiry applies, and the state period is heavily outcome-determinative: it can end a claim in the state courthouse that would survive in the federal one. A plaintiff who could escape the period by filing in federal court would always file there, and no important federal procedural policy stands against the period. The state period therefore governs, as it did in Guaranty Trust v. York.3
The same reasoning decides when a claim counts as brought. If state practice requires service of the summons and does not accept mere filing within the period, a diversity plaintiff who files in time but serves late is too late, which was the plaintiff's fate in Ragan.4 In Walker the plaintiff argued, plausibly, that Hanna had overruled Ragan. The Court disagreed. Hanna governs an unavoidable, direct collision between a Federal Rule and state law, and Walker presented no direct conflict.5
Only a federal directive that actually reaches the issue changes these answers. Erie applies only where no controlling federal statute exists, and the Federal Rules, adopted under the Rules Enabling Act, take precedence over state policy when they apply. When a Rule arguably covers the issue, the first question is whether it in fact does.6
The allocation of the burden of proof follows state law as well.7 A nice line separates it from the burden of pleading: Erie does not necessarily govern the pleading burden, but it does govern the burden of proof.8 Take a diversity case in State A in which the plaintiff's freedom from contributory negligence is at issue. The federal court applies federal law to how that freedom must be pleaded and State A's law to who bears the burden of persuasion, because it asks of each issue whether it is substantive or procedural.9
A state damages cap travels with the claim for the same reasons. No federal rule, statute, or constitutional provision speaks to the cap, so the court takes the vantage point of the time of filing. The cap necessarily limits recovery, and savvy plaintiffs would always choose the federal court if it ignored the cap. The choice is therefore outcome-determinative under Guaranty Trust and would encourage forum shopping. At step three no federal interest comparable to Byrd's counteracts the cap, so the cap is substantive and applies in federal court.10
A federal diversity court also takes its choice-of-law rules from the state where it sits. A diversity case touches more than one state whenever the parties are citizens of different states, and the court must then choose the law the forum state's courts would choose; Klaxon and Griffin apply Erie to choice-of-law rules.11 Lawyers call the choice between states' laws 'horizontal,' because it is a choice between sovereigns of equal dignity, and the choice between state and federal law 'vertical.' Klaxon extends Erie to the horizontal choice, so the court applies its home state's methodology.
Two rules that operate at the threshold follow the same logic. A state statute that bars a foreign corporation that has not qualified to do business in the state from suing in its courts dismisses the case without reaching the merits, and Woods holds that a federal diversity court must apply it. Otherwise a plaintiff could undermine a legitimate state policy simply by invoking federal rather than state jurisdiction.12 And the preclusive effect of a federal diversity court's dismissal is governed by a federal rule of decision that adopts the law the state courts of the forum state would apply, because any other rule would invite the forum shopping and inequitable administration of the laws that Erie seeks to avoid.13
Rules That Stay Federal
The allocation of fact-finding between judge and jury stays federal. In Byrd, a state rule gave the judge the question whether the plaintiff was an employee rather than an independent contractor, while federal practice sends factual questions to the jury. No federal rule or statute governed, so the Court weighed the interests on each side, and federal practice prevailed.15 Three considerations explain the result: the federal policy on judge-jury allocation is strong, the state policy is not tightly bound up with the parties' rights, and the choice is not very outcome-determinative.16 The contrast with limitations is the point. A limitations bar can fix the result in one courthouse and not the other, while moving a fact question from judge to jury is not heavily outcome-determinative and will not induce forum shopping.17
The same considerations keep a federal unanimity requirement in force in a diversity trial even though the state would accept a majority verdict. The state's aim, reducing hung juries, counts for little when the case is not being tried in the state's own system; the federal policy is strong and rests on tradition; and the choice is not heavily outcome-determinative.18 Set the results side by side. The damages cap follows the case into federal court, and the state allocation of fact-finding and the state majority-verdict rule do not. The cap changes what a plaintiff can recover; jury procedure changes only how the federal court conducts its trial.
Federal practice can also prevail at step one, before any weighing begins. Suppose a diversity plaintiff can meet a state's lenient pleading standard but not the plausibility standard of Twombly and Iqbal, which interprets Rule 8(a)(2), and the choice will decide whether the case is dismissed. The federal standard applies. The choice looks outcome-determinative, but the matter is decided at step one, where the outcome-determinative test has not yet come into play. Under Hanna the Federal Rules always apply unless a Rule exceeds the Rules Enabling Act or is otherwise unconstitutional, and that principle reaches judicial opinions interpreting the Rules.19 Set this beside the contributory-negligence example: federal law governs how a plaintiff pleads, and state law governs who carries the burden of persuasion.20
Forum non conveniens marks the edge of the settled applications. Federal law on the doctrine is not codified, so the analysis moves straight to the Erie, York, and Byrd line of cases.21 The argument for federal practice treats the doctrine as a matter of convenience. A federal court that hears a case a state court would decline does nothing to undermine state policy, and a federal court, unlike a state court, can transfer a case across the country under 28 U.S.C. § 1404(a), whereas a state court that finds another place more convenient can at most stay or dismiss without prejudice. The other side can borrow the logic of Woods and argue that a plaintiff should not escape a state's rule merely by filing in federal court.22 An essay should present both arguments and say which it finds stronger.
Arguing a Barred Counterclaim
A state-law bar on a counterclaim tests all three steps at once, and a good essay argues both sides before it picks one.
Step one yields nothing for Dauntless. The hypothetical stipulates that no Federal Rule or statute is on point, and a student who spots a candidate Rule must still ask whether it directly collides with the Ames bar, since in Walker the Court found no direct conflict.24
Step two favors Pacific. Ignoring the Ames bar would do what ignoring the time bar would have done in Guaranty: it would let a claim go forward in federal court that the state's courts would reject. Removal sharpens the forum-shopping point. A defendant that is a citizen of the forum state cannot remove, so Dauntless was able to choose a federal forum it hoped would be hospitable to its claim, knowing the claim would fail in Ames state court. If the court lets Dauntless prosecute the counterclaim in the face of Ames law, the shopping will have paid off.25
At step three Dauntless needs a federal interest to set against the bar, and Byrd requires the court to weigh the federal system's interest against the state's.26 The candidate is consolidation: the federal system has an interest in disposing of all claims between two parties in one action. One answer is that no consolidation interest is present, because in Guaranty the federal courts had no strong reason to try a claim that was time-barred in state court. That answer overlooks a fact the hypothetical has not supplied. Dauntless's claim may be triable as an original action in the state or federal court of another jurisdiction, perhaps Thayer. If it can and will be tried there, a ruling for Pacific splits the parties' dispute across two proceedings, the federal interest in consolidation becomes strong, and the case differs from Guaranty, where no other state court was assumed to have allowed the barred claim.27
Pacific has a second line of argument, and it may be the stronger one. A rule that denies recovery to an unlicensed contractor decides who may collect for the work, so it is arguably bound up with the definition of the parties' rights and obligations and is no mere form and mode of enforcement. Byrd marked that line. The South Carolina rule assigning the employee question to the judge was not bound up with the parties' rights; it was merely a form and mode of enforcing the compensation scheme, so the federal court was not compelled to apply it.28 A bar on the rights side of that line has little claim to be treated like Byrd's judge-jury rule, and the weighing that the consolidation argument invites may never begin. Even if the court treats the bar as a form and mode of enforcement, the consolidation interest still depends on a second available forum, which the hypothetical does not supply.
Keep this Erie question apart from a different, constitutional one: whether a state may exclude litigation from its courts or restrict it to them. Commentators group that question with the constitutional constraints on choice of law, and Hughes v. Fetter is the case usually cited, though it is usually considered puzzling.29
On the bare facts the state side is stronger, because the federal interest has nothing yet to attach to; a second available forum is the fact that changes that. Either conclusion is defensible if the opposing argument is met. A full answer states the outcome effect and the forum-shopping risk, names the federal interest concretely, asks whether the state rule defines the parties' rights, and explains why one side outweighs the other.