What law applies in federal court?

Question 1

If there is a diversity case in federal court, what are the CLAIMS based on?

Answer 1

State law

Question 2

What test do we use when a federal judge must decide an issue and needs to know whether to follow or ignore state law?

Answer 2

The Erie Doctrine

Question 3

Erie Doctrine Steps (simple)

Answer 3

1. Is there a federal law on point that conflicts with state law?
   * Yes - apply federal law
   * No - must apply state law if the issue is substantive
2. Is the issue substantive? (five clear areas + factors)
   * Yes - apply state law
   * No - apply federal law

Question 4

For Erie purposes, what are the five clearly substantive areas of law?

Answer 4

1. Conflict (or choice) of law rules;
2. Elements of a claim or defense;
3. Statutes of limitation;
4. Rules for tolling SoL; and
5. The standard for granting a new trial because the jury’s damages award was excessive or inadequate.

Question 5

For Erie purposes, how does a judge determine whether the issue is substantive (if not one of the five areas)?

Answer 5

THREE FACTORS

1. Outcome Determinative: Would applying or ignoring the state rule affect the outcome of the case?
2. Balance of Interests: Does either the federal or state system have a strong interest in having its rule applied?
3. Avoid Forum Shopping: If the federal court ignores state law on this issue, will it cause parties to flock to federal court?