The Erie Doctrine

Let's say a case is pending in a state court and involves state law issues. What law would the state court apply to the case? If you answered state law, then you are absolutely correct. Now, let's say that a case involving a federal law issue is pending in a state court or a federal court? What law would apply? If you answered federal law, you are on a roll! Okay, what about a case involving state law issues that is in a federal court based on diversity jursidiction? What law would the federal court follow? Well, here is where things get a bit complicated and the famous Erie Doctrine comes into play.

History

The Supreme Court in Swift v. Tyson, 41 U.S. 1 (1842), held that federal courts hearing diversity state law actions do not need to follow that state's common law. In other words, the Court held that the federal courts are only required to follow the state's statutory laws when ruling on state law issues and are not bound by the common law of that state. Thus, under Swift, the federal courts were free to develop federal common law for state law issues.

In 1938, however, the Court overturned Swift in Erie R. Co. v. Tompkins, 304 U.S. 65 (1938), by holding that a federal court in a diversity action must follow the substantive state common law when deciding on state law issues. The Court reasoned that by federal courts applying their own common law to state law issues in a divesity case leads to forum shopping (i.e., plaintiffs strategically filing a diversity case in federal or state courts depending on which court follows most plaintiff-friendly common law) and conflicts between federal and state courts on same issues.

The Eire Doctrine: Principle that in a federal case involing state law issues that is before the court based on diversity jurisdiction, the federal court must apply federal procedural law, but state substantive law.