On April 25, 1938, the U.S. Supreme Court decided Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), and overturned a century of federal common law. The decision in Erie led to a legal concept called the Erie Doctrine which requires federal courts to apply state substantive law for state issues in federal cases.

As you may know, there are 2 main ways in which a federal court can hear a case, including: (i) matters governed by the U.S. Constitution or acts of Congress (i.e. federal question jurisdiction) or (ii) matters based on diversity of citizenship (i.e. diversity jurisdiction – the parties are from two different states and the alleged damages equal or exceed $75,000).

In Erie, Tompkins filed a federal lawsuit in New York against Erie Railroad for personal injuries that he sustained while walking along the Erie Railroad tracks in Pennsylvania after being hit by an open railcar door. Under Pennsylvania law, Erie Railroad owed no duty of care to Tompkins. But under federal common law in New York the Erie Railroad did owe a duty of care to Tompkins. In other words, Tompkins knew he would lose against Erie Railroad if he filed his lawsuit in Pennsylvania.

So, Tompkins filed his lawsuit in New York federal court based on diversity of citizenship (i.e. because Erie Railroad was a New York corporation and Tompkins was an Ohio resident) where he was fairly certain he would win against Erie Railroad, and he did win. However, Erie Railroad appealed the decision to the U.S. Supreme Court where Tompkins’ victory was overturned. In particular, the U.S. Supreme Court had to overrule the case of Swift v. Tyson, 41 U.S. 1 (1842), and over 100 years of federal common law to overturn Tompkins’ victory.

On April 25, 1938, the Court determined that Swift allowed plaintiffs like Tompkins to forum shop (i.e. select the most beneficial court to file a lawsuit) at the expense of the judicial system. The Court ruled that the forum shopping allowed by Swift prevented the uniform administration of state laws and effectively denied litigants equal protection of the law. In the worst cases under Swift, a party that lost in state court could simply re-file in federal court for the same case.

Tompkins’ case was remanded (i.e. sent back to) the New York federal court to rule on the case based on Pennsylvania law, rather than New York law. And Tompkins lost his case based on Pennsylvania law just as likely knew he would when he originally avoided filing his case in Pennsylvania.

Today, according to the decision in Erie and the Erie Doctrine that has developed over time, federal courts must apply state law to state law issues in federal cases (and not federal common law) – but determining what state law to apply in certain cases can sometimes be fairly difficult.