An Avoidance Canon for Erie: Using Federalism to Resolve Shady Groves Conflicts Analysis Problem.

Author:Zoffer, Joshua P.


INTRODUCTION 485 I. CONFLICT OVER CONFLICTS IN ERIE QUESTIONS 492 A. The History of Conflicts and Avoidance in Erie Cases 493 1. The Early Cases: Avoidance Ascendant 493 2. Hanna and its Progeny: State Law in Retreat 495 3. Resurgent State Law and Avoidance 497 B. Erie Conflicts Today: The Shady Grove Problem 499 1. The Lessons of Shady Grove 499 2. Ordering Erie: Conflicts and REA Analysis 503 II. THE ROLE OF STATUTORY INTERPRETATION: FEDERALISM AND 505 AVOIDANCE A. The Expression of Constitutional Values in Statutory Interpretation 506 1. Values-Based Statutory Interpretation 507 2. Erie's Lost Federalism 509 B. Avoidance 512 III. A FEDERALISM-BASED AVOIDANCE CANON FOR ERIE QUESTIONS 513 A. Applying a Federalism-Based Avoidance Canon 513 B. The Case for Federalism-Based Avoidance 514 1. Consonance with Existing Canons: Constitutional Doubts 515 and Antipreemption 2. Protection of State Interests 518 3. Consistency, Accuracy, and Judicial Economy 519 4. Democratic Legitimacy and Error Correction 521 5. Forum Shopping and Equity 523 C. Responding to Counterarguments 524 1. Disuniformity in Federal Courts 524 2. Perverse Incentives for State Rulemaking 525 3. Discretion for Expansive Self-Interpretation 526 4. Difficulty Accounting for Federal Interests 527 5. Ambiguity in Identifying Ambiguous Rules 528 D. Assessing Alternative Erie Conflicts Approaches 529 1. The Shady Grove Alternatives 529 a. Justice Stevens's Concurrence 529 b. Justice Ginsburg's Dissent 531 2. Nonavoidance Conflicts Approaches for Erie Questions 533 3. Avoidance Approaches for Erie Questions 535 a. REA Avoidance 535 b. Traditional State-Authority Avoidance 536 IV. THE OPERATION OF THE CANON IN RESOLVING ERIE CONFLICTS 538 A. No Conflict Between Special Motions to Dismiss and Rule 12 538 B. Conflict Between Discovery-Staying Provisions and Rule 56 540 CONCLUSION 543 INTRODUCTION

The Erie doctrine has long been a legal enigma, perplexing generations of lawyers from first-year procedure students to federal judges. (1) Erie's guidance for choosing between federal and state law in diversity actions has suffered from ambiguity on several counts. Courts and commentators have struggled to define the boundary between substance and procedure; to determine whether and how that boundary should be drawn differently for federal procedural statutes, rules, and practices; and to identify the source of law that supplies the relevant standard for adjudication in each of those contexts. In situations governed by the Rules Enabling Act (REA), those involving a Federal Rule, Erie cases have faced a greater ambiguity: how to identify the existence of a conflict between a Federal Rule and state law necessitating application of the Erie doctrine in the first place. (2)

In 2010, Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co. highlighted a lacuna in the Supreme Court's Erie jurisprudence: there is no settled doctrinal approach for determining whether a Federal Rule and a state law actually conflict when there are multiple plausible interpretations of the Federal Rule. (3) Indeed, in Shady Grove, the Justices applied three distinct conflicts methodologies, yielding contradictory results and highlighting the extent of the doctrinal confusion over Erie conflicts. (4)

This question matters, particularly for our federal-state balance and the separation of powers. The plurality in Shady Grove affirmed the reading of the Rules Enabling Act adopted in Hanna v. Plumer and Sibbach v. Wilson & Co., which allows any Federal Rule that is arguably procedural to displace conflicting state law. (5) Under that reading, the operative question for the survival of a state law in federal diversity actions is whether the law is really in conflict with a Federal Rule; if so, the state law won't apply. (6) But as the concurrence and dissent both observed in Shady Grove, state laws that are facially procedural will often be bound up with important state regulatory and policy goals. (7) The application of the Hanna-Sibbach approach thus substantially inhibits the effect of these state policy judgments when litigants find themselves in federal court and the state law is deemed to conflict with a Federal Rule. This raises federalism concerns, particularly if one believes in "resurgent dynamism at the state level" and the reinvigoration of states as independent repositories of democratic experimentation. (8)

Shady Grove also implicates the constitutional separation of powers. It is courts that determine whether arguably substantive state law will be displaced. This power is normally reserved for Congress and is typically exercised by the courts only in areas where Congress has already exercised its enumerated lawmaking powers (e.g., in interpreting the preemptive effect of congressional statutes). (9) Although Federal Rules have the force of law, it is dubious whether courts interpreting them ought to be able to exercise the full scope of federal power to displace state law, because such Rules do not go through the full legislative process of bicameralism and presentment. (10)

As Ralph Whitten wrote after Shady Grove,

Combined with its failure to establish an appropriate and consistent method for interpreting Federal Rules to determine whether they conflict with state law, the Court leaves the fundamental, threshold question under the Erie doctrine in a state of incoherence. The result has and will continue to be chaos in the lower federal courts. (11) Whitten's prediction proved correct. The Court's confused Erie doctrine has led to ongoing or emerging circuit splits in several areas, including (1) whether state laws creating special motions to dismiss for strategic lawsuits against public participation (SLAPPs) (12) conflict with Rule 12's motion to dismiss provisions; (13) (2) whether discovery-staying provisions in anti-SLAPP laws conflict with Rule 56's discovery rules; (14) (3) whether state laws requiring certain sworn statements beyond the filing requirements of Rule 11 conflict with that Rule; (15) and (4) whether state laws barring requests for punitive damages without court permission conflict with Rule 8(a)(3)'s requirement that complaints contain a demand for relief. (16) Each of these splits has been driven, at least in part, by the application of inconsistent Erie conflicts methodologies, varying from plain textual interpretation to outright conflicts avoidance.

Responding to this confusion over methodology, Allan Erbsen has called for the development of "a default rule--which one might label an 'Erie canon'--to determine whether federal statutes and rules should be interpreted broadly or narrowly to embrace or avoid conflict with otherwise applicable state laws." (17) Erbsen argues that such a default rule would benefit Erie jurisprudence by improving judicial economy, reducing arbitrariness in decision-making, providing better ex ante guidance to rule drafters, and linking rule interpretation to broader normative commitments. (18) But he stops short of proposing a specific default rule.

In this Note, I offer just that: a federalism-based avoidance canon for Erie conflicts. This canon fills the interpretive gap left by Shady Grove. I argue that courts facing a potential conflict between a Federal Rule and a state law should first ask whether there is a reading of the Federal Rule that can be plausibly supported by the Rule's text and Advisory Committee Notes that does not conflict with the state law in question. (19) If the answer is "yes," the court should default to that reading without analysis of the Rule or state law's substantive purposes, thereby avoiding the conflict and the displacement of state law. If the answer is "no," the court should apply the Federal Rule, per Hanna, so long as it is valid under the REA. This approach would resolve the troublesome lacuna in the Court's current Erie jurisprudence, reducing the risk of future inconsistencies and circuit splits. It would also pay greater respect to important state interests by more often giving them effect in federal court. Finally, it would protect the separation of powers by limiting judicial power to displace state law.

This approach is somewhat radical in that it purports to rationalize a fundamentally ad hoc, functionalist doctrine with a formalist rule. Despite the difficulties it has created, one benefit of the Court's existing Erie conflicts methodology (or lack thereof) is the flexibility it affords courts to make discretionary judgments about the relative importance of the federal and state interests at play. (20) Nevertheless, I believe that a federalism-based avoidance canon for Erie conflicts will achieve these objectives better than an ad hoc interest-balancing approach, given the Court's past decisions and the institutional constraints involved.

What, then, would the new equilibrium for Erie cases look like under this canon? The canon's principal effect would be far more consistent adjudication of Erie conflicts cases. This canon is intentionally triggered by a "plausible" non-conflicting reading of a Federal Rule in order to set the bar low enough to avoid debate over the relative superiority of potential interpretations. (21) Judges have been known to differ in their assessments of statutory ambiguity. (22) Setting the bar at plausibility should, in theory, make it easier for those who find at least reasonable nonconflicting interpretations to convince others to join them. (23)

The canon's second-order effects are more conceptually interesting, if less immediately clear. There are two possible directional equilibria and a fluid middle ground between them. One option is that this canon will result in far greater application of state law in federal court. If the canon is faithfully applied and Rules interpreted narrowly are not amended to facially preempt state law, then relevant state law provisions will apply in diversity actions and their...

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