Erie R. Co. v. Tompkins

On a 6-2 vote, the U.S. Supreme Court held that the Circuit Court of Appeals was in error in its view that there was such a thing as "general law", and sent the case back for further review. More significantly, it held that the doctrine of Swift v. Tyson was "an unconstitutional assumption of powers" by federal courts, and said, in a strikingly clear sentence, "There is no federal general common law."

Writing for the majority, Justice Brandeis began by announcing that the question was, should the "oft-challenged" doctrine of Swift v. Tyson be "disapproved"? The answer was yes, for three reasons.

First, because of Swift v. Tyson's interpretation of section 34 of the Judiciary Act of 1789, federal courts had assumed a power that even Congress could not have given them. Brandeis cited eight law review articles written between 1873 and 1917 questioning that interpretation, and then accepted as authoritative a law professor's 1923 research finding in the Harvard Law Review that the original intent of section 34 was to ensure that federal courts followed the laws of the state, "unwritten as well as written."

Citing nine law review articles written between 1928 and 1935, Brandeis then noted that criticism of the doctrine had increased after the 1928 so-called Taxicab cases, in which a Kentucky cab company reincorporated in Tennessee in order to win a case in federal court that it could not have won as a Kentucky citizen in a Kentucky state court.

Second, Swift v. Tyson had created much confusion. Instead of increasing uniformity in the development of common law, state courts were decreasing it by continuing to issue their own opinions on questions of common law. Further, there was no clear line between cases that belonged to "general law" and to state law. Brandeis observed that as of 1937, there had already been nearly 1,000 lower court decisions trying to find the distinction between the two kinds of law.

Worse, Swift v. Tyson created injustices. It effectively nullified equal protection of the law, since citizens could win in federal courts cases they could not win in state courts, merely by moving from one state to another, or, in the case of corporations, by reincorporating in a different state, without even moving. In this way, "noncitizens" had more power than "citizens" in diversity of citizenship cases. Further, federal courts kept expanding the list of legal topics included under "general law," which meant that the effects of "grave discrimination" by noncitizens against citizens was now far-reaching.

Justice Brandeis's third reason for concluding that the doctrine of Swift v. Tyson was unconstitutional was that it "is an invasion of the authority of the state, and, to that extent, a denial of its independence." Interestingly, Brandeis was quoting from an 1892 dissent by Justice Field. Brandeis said clearly that the law to be applied in diversity of citizenship cases is the law of the state, and that whether the law is made by the state's legislature or by its judges "is not a matter of federal concern." He flatly stated that "[t]here is no federal general common law." Congress has no power to declare substantive rules of common law in states and nowhere does the Constitution give such power to the federal courts. He then cited Justice Oliver Wendell Holmes dissenting opinion in the 1928 Taxicab cases to the effect that "[t]he authority and only authority is the State, and . . . the voice adopted by the State as its own . . . should utter the last word." Curiously, in rejecting the concept of "federal general common law," he did not mention Justice Holmes's famous characterization of that concept in Southern Pacific Co. v. Jensen (1917) as a "brooding omnipresence in the sky."

With this ruling, the Court invalidated the doctrine of Swift v. Tyson; it did not reverse the case, as such. Nor, as Brandeis pointed out, did his opinion hold unconstitutional section 34 of the Federal Judiciary Act of 1789. "We merely declare," he concluded, that the doctrine's use by the Supreme Court and lower federal courts has "invaded rights which are . . . reserved by the Constitution to the several states."