Erie Railroad v. Tompkins

Swift had interpreted the Rules of Decision Act to require federal courts to follow state statutes and strictly local rules, but not state judicial decisions on matters labeled “general law,” such as commercial law and tort liability. That interpretation allowed federal courts to formulate their own substantive rules while deciding diversity cases.

The Court concluded that the distinction between “general” and “local” law was unsound in both theory and practice. State courts continued to follow their own rules, so Swift failed to create national uniformity. At the same time, the uncertain boundary between general and local law generated confusion and unpredictable results.

Swift also created serious inequality. The same substantive right could differ depending on whether the case was heard in state or federal court, and diversity jurisdiction gave noncitizens an opportunity to select the more favorable federal rule. Corporations could even manipulate citizenship by reincorporating elsewhere, as illustrated by Black & White Taxicab Co. v. Brown & Yellow Taxicab Co.

The Court held that there is no federal general common law. A State’s common law derives from the authority of that State, whether expressed by its legislature or its highest court. Neither Congress nor the federal courts possess a general constitutional power to create substantive common-law rules governing disputes arising under state law merely because the parties are diverse citizens.

The Court did not invalidate the Rules of Decision Act itself. Rather, it rejected Swift’s application of that Act as an unconstitutional intrusion on the States’ authority to define their own substantive law. The Act was properly understood to require application of state law, written and unwritten, unless controlling federal law provides otherwise.

Erie maintained that Pennsylvania’s highest court treated a person walking along a railroad right-of-way on a longitudinal path as a trespasser and therefore limited the railroad’s duty to avoiding willful or wanton injury. Tompkins disputed both the content and applicability of that Pennsylvania rule.

Because the court of appeals treated the issue as one of general law, it never resolved the parties’ competing interpretations of Pennsylvania decisions. After rejecting Swift, the Supreme Court could not sustain that approach.

The Supreme Court therefore reversed and remanded. It left unresolved the precise Pennsylvania rule, including Tompkins’s contention that he was injured at or near a transverse crossing rather than solely on a longitudinal path.