The Erie Doctrine: Federalism, Procedure, and Substantive Law Part 5

Civil procedure occupies a unique place in the American legal system, mediating the relationship between federal and state courts while shaping how substantive rights are vindicated. Nowhere is this mediation more intricate—or more contested—than in the doctrine derived from Erie Railroad Co. v. Tompkins. The Erie Doctrine addresses a deceptively simple question: when a federal court exercises diversity jurisdiction, should it apply state law or federal law? The answer, first articulated in 1938 and refined over decades, has profound implications for federalism, litigant strategy, and the very nature of law in the United States.

The Erie Doctrine is not merely an academic curiosity. It is the gateway through which all federal courts must pass when adjudicating state-law claims. It determines whether substantive rights created by states retain their force in federal court or yield to federal procedural norms. It prevents forum shopping that would otherwise encourage litigants to exploit differences between state and federal law. And it embodies a delicate balance: preserving the supremacy of federal law while respecting the sovereignty of the states.

To understand the Erie Doctrine, one must begin with the world that existed before Erie Railroad Co. v. Tompkins—a world defined by Swift v. Tyson and the federal general common law.

The Pre-Erie Era: Swift v. Tyson and the Federal General Common Law

In 1842, the Supreme Court decided Swift v. Tyson, a case that would govern federal diversity practice for nearly a century. Justice Joseph Story, writing for the Court, held that the Rules of Decision Act, which required federal courts to apply the “laws of the several states” in diversity cases, did not bind federal courts to apply state court decisions on questions of general law. According to the Court, only state statutes and local customs constituted “laws” within the meaning of the Act; federal courts were free to develop their own body of general common law on matters deemed to be of national concern, such as commercial paper, contracts, and tort principles.

The promise of Swift was alluring. It envisioned a uniform national common law that transcended parochial state boundaries, fostering predictability in commercial relations and protecting litigants from local biases. In practice, however, Swift produced the opposite effect. Because federal courts were free to disregard state common-law decisions, outcomes often diverged dramatically between state and federal courts sitting in the same state. This divergence incentivized forum shopping: litigants with access to federal court would file there to escape unfavorable state precedents, while their opponents sought the opposite. The resulting inequities were notorious and undermined public confidence in the federal judiciary.

By the 1930s, dissatisfaction with Swift reached a crescendo. Critics argued that the federal general common law had become a vehicle for corporate defendants to evade state regulations and that it offended principles of democratic legitimacy by allowing unelected federal judges to displace state judicial lawmaking. Against this backdrop, Erie Railroad Co. v. Tompkins arrived at the Supreme Court.

Erie Railroad Co. v. Tompkins: The Constitutional and Statutory Shift

In Erie Railroad Co. v. Tompkins (1938), the Court confronted a personal injury suit filed in federal court under diversity jurisdiction. Tompkins, a Pennsylvania citizen, had been struck by a passing train while walking along the railroad’s right-of-way in Pennsylvania. Under Pennsylvania state law, Tompkins was deemed a trespasser and thus could recover only for willful or wanton negligence. Under federal general common law, however, he might recover under a more favorable ordinary negligence standard. The district court, applying federal general common law pursuant to Swift, awarded Tompkins damages.

The Supreme Court, in a landmark opinion by Justice Brandeis, reversed. It held that the doctrine of federal general common law was unconstitutional and inconsistent with the Rules of Decision Act. The Court declared that “there is no federal general common law,” and that federal courts sitting in diversity must apply state substantive law, whether statutory or decisional. Brandeis grounded this holding in twin rationales: first, that the Swift doctrine violated the constitutional allocation of lawmaking power between state and federal governments; and second, that it fostered the very evils—forum shopping and inequitable administration of the laws—that it was supposed to prevent.

The decision in Erie thus abolished the federal general common law and inaugurated a new era in federal civil procedure. No longer could federal courts in diversity cases fashion their own rules of decision on substantive matters. Instead, they were bound to apply the substantive law of the forum state, including the state’s highest court interpretations of its common law.

Substantive vs. Procedural Law: The Central Question

Erie resolved one question but raised another: what counts as “substantive” law that federal courts must apply, and what counts as “procedural” law that federal courts may supply through the Federal Rules of Civil Procedure or their inherent authority?

The Constitution and the Rules Enabling Act provide partial answers. The Rules Enabling Act authorizes the Supreme Court to promulgate procedural rules for federal courts, provided that such rules do not “abridge, enlarge, or modify any substantive right.” This statutory limit reflects a core federalism principle: procedural uniformity is permissible, but not at the expense of state-created substantive rights.

Distinguishing substance from procedure, however, is notoriously elusive. Procedure often affects outcomes as much as substance; rules about burdens of proof, evidentiary standards, or statutes of limitations can determine the result of litigation as surely as the substantive law of negligence or contract. Recognizing this, the Supreme Court developed a series of tests to navigate the Erie landscape, balancing federal procedural interests against the twin aims of Erie: avoiding forum shopping and inequitable administration of the laws.

The Twin Aims of Erie: Forum Shopping and Inequitable Administration

In subsequent cases, the Court clarified that the Erie Doctrine serves two interrelated goals. First, it seeks to discourage forum shopping—the strategic choice of federal or state court to exploit differences in substantive law. Second, it aims to prevent the inequitable administration of the laws, ensuring that litigants do not gain unfair advantages simply by selecting one forum over another.

These aims guide the analysis when no Federal Rule directly governs the disputed issue. If applying federal law would encourage litigants to choose federal court for strategic advantage, or if it would produce inequitable outcomes between state and federal forums, Erie generally requires application of state law. If, however, the federal interest in uniform procedure outweighs these concerns, federal practice may prevail.

Hanna v. Plumer and the Federal Rules

The Supreme Court’s decision in Hanna v. Plumer (1965) refined the Erie framework by addressing the relationship between state law and the Federal Rules of Civil Procedure. In Hanna, the question was whether service of process in a diversity case should follow the federal rule, which permitted service by leaving papers at the defendant’s residence, or the state rule, which required personal service.

The Court held that when a Federal Rule of Civil Procedure directly conflicts with state law and is valid under the Rules Enabling Act, the federal rule governs. The key inquiry is whether the rule is genuinely procedural—whether it regulates the manner and means of litigation rather than the substance of rights. So long as the rule does not abridge, enlarge, or modify substantive rights, it applies in federal court, even if outcome-determinative differences arise.

Hanna thus introduced a two-track Erie analysis. When a federal rule applies, the test is validity under the Rules Enabling Act. When no federal rule governs, courts revert to the twin aims of Erie: preventing forum shopping and inequitable administration.

Outcome Determination and the York Test

In Guaranty Trust Co. v. York (1945), the Court articulated the “outcome-determinative” test: if applying federal rather than state law would significantly affect the outcome of the litigation, state law should govern. While this test provided a clear standard, it risked swallowing nearly every procedural question, since most procedural rules can affect outcomes at the margins. Later decisions, notably Byrd v. Blue Ridge Rural Electric Cooperative (1958), tempered the York test by introducing a balancing approach: federal interests in maintaining the integrity of the federal system may justify applying federal practices even if outcome-determinative.

Modern Erie Doctrine: A Balancing of Interests

The modern Erie analysis thus proceeds along two pathways. If a Federal Rule directly governs, courts apply the rule so long as it is procedural and consistent with the Rules Enabling Act. If no federal rule applies, courts consider whether applying federal law would encourage forum shopping or produce inequitable administration of the laws. This approach preserves the dual goals of Erie while recognizing the federal courts’ legitimate interest in maintaining uniform procedural practices.

Contemporary Erie cases continue to grapple with gray areas. For example, should state statutes of repose apply in federal diversity cases? What about state evidentiary privileges, caps on damages, or attorney’s fee rules? The answers often depend on nuanced assessments of whether these rules are substantive or procedural and how strongly federal interests are implicated.

Policy Implications: Federalism, Liberty, and Uniformity

The Erie Doctrine embodies profound federalism values. By requiring federal courts to apply state substantive law, it respects the sovereignty of states to define rights and obligations within their borders. It prevents federal courts from displacing state policy choices and ensures parity between state and federal litigants.

From a libertarian perspective, Erie restrains federal judicial power, confining federal courts to their constitutionally prescribed role and protecting individuals from unpredictable shifts in substantive law. It reflects a modest vision of federal judicial authority, one that privileges state lawmaking and curtails judge-made federal common law.

Yet Erie also introduces complexity and unpredictability. The substance–procedure distinction is notoriously slippery, and litigants often expend significant resources litigating Erie issues themselves. Critics argue that Erie’s balancing tests and twin aims create uncertainty and incentivize strategic behavior—precisely the problem Erie sought to cure.

Conclusion: Erie as Constitutional Compass

The Erie Doctrine remains one of the most enduring and contested doctrines in civil procedure. It is at once a repudiation of federal judicial overreach and an affirmation of state sovereignty, yet it also preserves space for uniform federal procedure under the Rules Enabling Act. In practice, Erie forces federal courts to navigate the delicate boundary between substance and procedure, federal and state authority.

More broadly, Erie symbolizes the American commitment to dual sovereignty: a federal system where state and federal courts coexist, each respecting the other’s domain. For students and practitioners alike, Erie is not merely a doctrinal hurdle but a constitutional compass, guiding the practice of civil litigation and shaping the contours of American federalism.

The next post in this series will move from Erie’s choice-of-law questions to pleadings—examining the mechanics of commencing a civil action, the evolution from notice to plausibility pleading, and the transformative impact of the Supreme Court’s decisions in Twombly and Iqbal on federal civil litigation.