An Overview of Erie Today

Wendy Collins Perdue
Georgetown University Law Center

If there a valid, federal statute or FRCP on point, it applies. This principle reflects the basic notion of the Supremacy Clause. See Stewart Org. v. Ricoh Corp., 487 U.S. 22, 27 (1988)("If Congress intended to reach the issue before the district court, and if it enacted its intention into law in a manner that abides with the Constitution, that is the end of the matter").
1. Determining whether the statute or FRCP valid. Statutes (and FRCPs) must be constitutional. In addition, a FRCP must also be within the delegated authority of the Rules Enabling Act, 28 U.S.C. § 2072.
  1. Constitutional limits on FRCP. Hanna v. Plumer, 380 U.S. 460, 472 (1965): "the constitutional provision for a federal court system (augmented by the Necessary and Proper Clause) carries with it congressional power to make rules governing the practice and pleading in those courts, which in turn includes a power to regulate matters which, though falling within the uncertain area between substance and procedure, are rationally capable of classification as either."
  2. Rules Enabling Act. The Rules "shall not abridge, enlarge or modify any substantive right." Although the Court has never struck down an FRCP, it has repeatedly indicated that Rules should be interpreted against the backdrop of the REA (see next section).
2. Determining whether the statute or Rule on point. Since the Court has never invalidated a FRCP, this is the stage at which most of the work is done.
  1. Interpret the Rules to avoid REA (or constitutional) problems. See, e.g., Semtek Int'l v. Lockheed Martin Corp., 531 U.S. 497 (2001); Ortiz v. Fibreboard Corp., 527 U.S. 815, 842 (1999); 19 Wright & Miller, Federal Practice and Procedure § 4510 at 299. But see Catherine Struve, The Paradox of Delegation: Interpreting the Federal Rules of Civil Procedure, 150 U. Pa. L. Rev. 1099, 1151 (2002)("the Court's duty to invalidate Rules that transgress the Enabling Act limitation does not authorize it to revise a Rule in the name of avoiding Enabling Act problems").
  2. Interpret the Rules to avoid Erie problems? Ely's famous article explained that most so-called Erie analysis is irrelevant when there is a FRCP on point. See Ely, The Irrepressible Myth of Erie, 87 Harv. L. Rev. 693 (1974). Semtek and even Gasperini may have rescrambled what Ely had carefully explained. See Semtek., 531 U.S. at 504 (Court rejects an interpretation of Rule 41 because "as so interpreted, the Rule would in many cases violate the federalism principle of Erie . . . by engendering 'substantial' variations [in outcomes] between state and federal litigation' which would 'likely . . . influence the choice of a forum.'"); Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 n.7 (1996)("Federal courts have interpreted the Federal Rules . . . with sensitivity to important state interests and regulatory policies"). See also Stewart Org., 487 U.S. at 37-38(Scalia, dissenting)("a broad reading that would create significant disuniformity between state and federal courts should be avoided if the text permits"). The Ninth Circuit has for some time done an Erie analysis even after determining that there was a FRCP on point. For example, in Harvey's Wagon Wheel, Inc. v. Van Blitter, 959 F.2d 153 (9th Cir. 1992), after determining that Rule 41(b) was in conflict with a state rule and sufficiently broad to cover the point at issue, the court went on to discuss whether application of the Rule would violate the "twin aims of Erie." This approach has been criticized as doing "much to confuse the clarity created by the Supreme Court's decision in Hanna." 19 Wright and Miller, Federal Practice and Procedure, § 4508 at 54 (2002 Pocket Part).
  3. Ascertaining the scope of the Rule. Sometimes the focus is on whether the FRCP and a state rule are in "direct collision". Hanna, 380 U.S. at 472, or can "exist side-by-side," Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1540 (10th Cir. 1996). Under this approach, the scope and meaning of the FRCP seems to turn on the scope and presence of state law. Compare Walker v. Armco Steel Corp., 446 U.S. 740 (1980). (Rule 3 was intended to displace state tolling provisions) with West v. Conrail, 481 U.S. 35 (1987)(in federal question cases, Rule 3 is a tolling provision).
    Other times the analysis focuses less on the clash between state and federal rules and begins with more of an analyses of the intended scope of the federal rule." E.g., Burlington Northern R.R. Co., v. Woods, 480 U.S. 1, 4-5 (1987)(FRCP "sufficiently broad" to "control the issue" before the court); Steward Org., 487 U.S. at 26 (involving 28 U.S.C. § 1404 and state law re forum selection clauses; the issue "involves a straightforward exercise in statutory interpretation to determine if the statute covers the point in dispute"); see also Walker v. Armco Steel Corp., 446 U.S. 740, 749-50 n.9 (1980)(FRCP should not "be narrowly construed in order to avoid a 'direct collision' with state law. The Federal Rules should be given their plain meaning.").
    1. Examples of Supreme Court interpretations:
      Rule 3: an "action is commenced by filing a complaint." This Rule is not intended to toll a state statute of limitations. Walker.
      Rule 41: "a dismissal . . . operates as an adjudication upon the merits." This Rule does not address the preclusive effect of a federal judgment and simply bars refiling in the same court. Semtek.
      Rule 59: a "new trial may be granted . . . for any of the reasons for which new trials have heretofor been granted in actions at law in the courts of the United States." This Rule does not require a federal standard for determining whether verdicts are excessive. Gasperini.
      App. Rule 38: "If a court of appeals determines that an appeal is frivolous, it may . . . award just damages . . .." This Rule requires an exercise of discretion and precludes of a state law mandating a penalty. Burlington Northern R.R.
      28 U.S.C. § 1404(a): allows change of venue "[f]or the convenience of parties and witnesses, in the interest of justice." Under this statute, federal courts are expected to take into account any forum selection clause even if it is unenforceable under state law. Stewart Org.
    2. Some questions these cases leave open:
      Gasperini: If Rule 59 does not specify a federal standard for new trials based on the excessiveness of a verdict, does it include a federal standard for ruling on new trial motions based on the weight of the evidence?
      Semtek: Is Rule 13(a) (requiring inclusion of compulsory counterclaims) a general preclusion rule? Or should it be interpreted like 41(b) as simply prohibiting the defendant from later bring the claim to the same court? What about Rule 41(a)(1)(ii) "second dismissal" rule? Does it just prohibit the plaintiff from coming back to the same district court?
    3. Some interpretative issues in the lower courts:
      Some states prohibit the inclusion in the complaint of claims for punitive damages without first making a showing that the claim is supported. Lower courts have split on whether this requirement is inconsistent with FRCP, particularly Rule 8(a)(3). Compare Cohen v. Office Depot, Inc., 184 F.3d 1292 (11th Cir. 1999) (Rule 8(a)(3) allows plaintiff to include punitives in the complaint and state law prohibits it; state law does not apply), with Jones v. Krautheim, 208 F.Supp. 2d 1173 (D. Colo. 2002) (no conflict with Rule 8(a)(3) so long as plaintiff has an opportunity to amend complaint; apply state law).
      Some states require in malpractice actions that the plaintiff file within some period of time the affidavit of an expert opining that the claim has merit. Courts have split on whether this is inconsistent with FRCP, particularly Rules 8, 9, 11, 26(a)(2) and 37. Compare Poindexter v. Bonsuken, 145 F.Supp. 2d 280 (E.D.Tex. 2001) (expert report requirements and sanctions were inconsistent with Rules 2(a)(2) and 37; state law does not apply), with Chamberlain v. Giampapa, 210 F.3d 154 (3d Cir. 2000) (certificate of merit requirements not inconsistent with FRCP; state law applies).
What if there is no Rule or statute on point? This is "the typical, relatively unguided Erie choice." Hanna, 380 U.S. at 47. The Court has articulated two basic approaches, that of Hanna and of Byrd v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525 (1958).
1. Hanna - "twin aims of Erie". "The Erie rule is rooted in part in a realization that it would be unfair for the character or result of a litigation materially to differ because the suit had been brought in a federal court . . . . The 'outcome-determination' test therefore cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws." 380 U.S. at 468. Focus of Hanna test is on litigant equality.
2. Byrd - the three pronged balancing test. The Court set out a three-pronged approach which considers, (1) whether the state law is bound up with state-created rights and obligations, (2) whether there are countervailing considerations that would warrant a federal rule, and (3) the effect of the rule in question on outcome.
3. Hanna or Byrd? Hanna made only passing reference to Byrd and the up until Gasperini, the Supreme Court didn't seem to rely on or even cite Byrd. Byrd nonetheless retained strong academic support as the approach that better captures the federalism concerns of Erie. See, e.g., Redish & Phillips, Erie and the Rules of Decision Act: In Search of the Appropriate Dilemna, 91 Harv. L. Rev. 356 (1977); Allan Stein, Erie and Court Access, 100 Yale L.J. 1935 (1991). But see Allan Ides, The Supreme Court and the Law to Be Applied in Diversity Cases: A Critical Guide to the Development and Application of the Erie Doctrine and Related Problems, 163 F.R.D. 19, 86-87 (1995). Lower courts remained mystified, sometimes using Hanna, sometimes Byrd, and sometimes both. See Martin Redish, Federal Jurisdiction: Tensions in the Allocation of Judicial Power 221-25 (2d ed. 1990)(discussing cases that rely on Byrd).
4. Gasperini - Byrd lives! In Gasperini, the Court cited and relied on Byrd as well as Hanna. The case held that in a motion for new trial based on the size of the damage award, the district court should apply the state law standard of review in evaluating whether the award is excessive. However, the Court also held that although state law required appellate courts to do an independent review of the excessiveness of a verdict, federal courts should not follow this aspect of state law - instead, appellate court review should use an "abuse of discretion" standard. In analyzing the trial court standard of review, the Court relied on Hanna (and didn't cite Byrd); in determining the appellate court standard, the Court relied on Byrd and didn't cite Hanna.
5. A reconciliation? Erwin Chemerinsky has offered an approach that attempts to reconcile Hanna and Byrd. See Erwin Chemerinsky, Federal Jurisdiction § 5.3 at 315 (3d ed. 1999). Assuming there is no FRCP on point, then the first step is to apply the Hanna "twin aims" test. If applying a federal rule would not produce forum shopping or unfairly discriminate then apply the federal rule. If applying a federal rule would violate the twin aims, then one considers whether there are "countervailing federal interests." At least one court of appeals has now endorsed this approach. See Esfeld v. Costa Crociere, 289 F.3d 1300, 1307 (11th Cir. 2002).
6. Semtek: Erie or Federal Common Law? In Semtek, a federal court in California had dismissed a diversity case as time barred. The suit was refiled in Maryland state court. The Supreme Court held that the preclusive effect of a federal judgment (1) is not controlled by Rule 41(b), (2) that it is governed by federal common law, and (3) that the federal common law rule should incorporate state law - in this case the state law of California. At step (2) of the opinion, the Court made no reference to Erie, instead it announced that this is a matter of federal common law. How is one to tell whether an area should be addressed as one of federal common law versus a traditional Erie question? For example, in Chambers v. NASCO, Inc., 501 U.S. 32 (1991), the issue was whether federal courts had to apply state law concerning sanctions for abusive litigation conduct. The Court held that federal courts could apply judge-made federal law, but Court analyzed this area of inherent power as in Erie question not a federal common law question. But might not the inherent power of a federal court to control abusive litigation conduct be a matter of federal common law? Similarly, might the issue of forum non conveniens be a matter of federal common law (with or without borrowing of state law) rather than an Erie question?