An Explanation of the Erie Doctrine

The Erie Doctrine is definitely among the topics tested on the MBE that students believe to be the most difficult.  It's tough but if analyzed systematically you'll be able to answer these difficult questions correctly.

The Erie Doctrine aims to clarify whether a federal court in a case that is in federal court based on diversity of citizenship will apply its own federal law or instead apply state law to an issue in the case. A federal court in a diversity case will apply its own procedural law, but it must apply the substantive law of the state in which the court sits.

Step one in the analysis is to ask whether there is a federal law on point (for example, a Federal Rule of Civil Procedure). If there is, and provided it is valid, the federal rule should be applied. Oftentimes, the federal court will have to decide whether to apply state or federal law to a given issue, and that's where the Erie Doctrine provides some guidance.

If the issue is procedural, a judge can decide to apply federal law when determining that issue. If the issue is substantive, state substantive law rather than federal law will be used to decide the issue. It's not easy to determine whether the issue is procedural or substantive but the test to make that determination is called the outcome determinative test.  An issue is substantive rather than procedural if the issue substantially effects the outcome of the case.  The court will also balance the interests so that if the state has a great interest in having its own law applied, the issue might be deemed substantive and state law will apply. Finally, there is the goal of deterring forum shopping: if failing to apply state law would increase litigation in the federal courts, and if the increase would be due to the fact that the federal law is likely to provide a favorable judgment, the issue might be deemed substantive so that state law applies.

For purposes of the MBE, there are some issues that are clearly substantive. These include statutes of limitations, rules for tolling statutes of limitations, choice of law rules, and elements of a claim or defense. On these issues apply state law.  It's possible that a state statute or rule may contain both substantive and procedural elements; in such cases, the federal courts will apply the state law to the substantive elements, and the federal law to the procedural elements.

If it's determined that a federal court will apply state law, it will apply the substantive law that would be applied by the highest court in the state.