Erie doctrine

The Erie doctrine is a fundamental legal doctrine of civil procedure in the United States which mandates that a federal court called upon to resolve a dispute not directly implicating a federal question (most commonly when sitting in diversity jurisdiction, but also when applying supplemental jurisdiction to claims factually related to a federal question or in an adversary proceeding in bankruptcy) must apply state substantive law. The doctrine follows from the Supreme Court landmark decision in Erie Railroad Co. v. Tompkins (1938). The case overturned Swift v. Tyson, which allowed federal judges sitting in a state to ignore the common law local decisions of state courts in the same state in diversity actions. There are two main objectives of the Erie decision: (1) to discourage forum shopping among litigants, and (2) to avoid inequitable administration of the laws. Broadly speaking, the second objective is sometimes referred to as "vertical uniformity" and is rooted in the idea that in a given state, the outcome of the litigation should not be grossly different just because a litigant filed a claim in a state court rather than a federal court or vice versa. The Erie doctrine today applies regardless of how the federal court may hear a state claim. Whether the federal court encounters a state law issue in diversity jurisdiction, supplemental jurisdiction, or bankruptcy jurisdiction, the federal court must honor state common law when deciding state law issues. In effect, when the U.S. Constitution does not control and Congress has not legislated (or cannot legislate) on a topic, then the laws of the states necessarily govern and state judge-made rules are equally binding on the federal courts as state statutes. The federal court must determine if either 1) state law is clear as to the case in controversy, or 2) if not, then has the state's highest court ruled specifically on a similar case. If so, the state law or court ruling must be followed.