INTRODUCTION 1848 I. ERIE AND THE BIRTH OF MODERN FEDERAL COMMON LAW 1849 A. The Shift in the Landscape that Surrounded Erie 1849 B. The Changes that Erie Wrought 1851 1. Institutional and Analytical Transitions 1853 Following the Ruling in Erie 2. Federal Common Law 1860 a. Internal Administration of Federal Court 1862 Proceedings b. Preemptive Liability and Regulatory Rules 1868 3. Competing or Overlapping Claims of Interested States 1871 C. Federal Common Law and Klaxon 1878 II. CHOICE OF LAW AND KLAXON TODAY 1883 A. Choice of Law and Federal Common Law in the Modern Era 1884 B. Jurisdictional Policy and the Class Action Fairness Act 1888 III. INSTITUTIONAL POLICY AND IMPLEMENTATION 1891 CONCLUSION 1893 INTRODUCTION
For seventy-five years, Klaxon v. Stentor Electric Manufacturing (1) has provided a one-line answer to choice-of-law questions in federal diversity cases: Erie Railroad v. Tompkins (2) requires the federal court to employ the same law that a court of the state would select. The simplicity of the proposition likely accounts for the unqualified breadth with which federal courts now apply it. Choice of law doctrine is difficult, consensus in hard cases is elusive, and the anxiety that Erie produces over the demands of federalism tends to stifle any reexamination of core assumptions. The attraction of a simple answer is obvious. But Klaxon cannot bear the weight with which it has been loaded.
Like Erie itself, Klaxon combines a core ruling on the limits of federal judicial power with a highly contextual statement of federal jurisdictional policy. Unlike Erie, however, Klaxon has not benefited from a long line of rulings mapping the boundaries of these respective principles. This doctrinal desuetude is no longer sustainable following the enactment of the Class Action Fairness Act (CAFA). (3) CAFA effectuates a shift in the jurisdictional policy of the federal courts that requires a critical examination of the meaning and scope of Klaxon. And by moving increasing numbers of complex state-law cases into federal proceedings that are then consolidated through the multi-district litigation process, CAFA has created increased pressure to undertake that reexamination.
This Article offers a general approach to analyzing choice of law and jurisdictional policy in the federal courts. It begins by placing the spare language of Klaxon in analytical context and tracing the multiple lines of doctrine that intersect in the ruling. Those doctrines were undergoing a transformation at the time the Court issued its decision, yet the Klaxon Court confined its analysis narrowly, a fact that speaks to the limited scope of its holding. The Article then describes the relationship between federal jurisdictional policy and the elements of modern choice of law and maps the jurisdictional changes that Congress effectuated with CAFA and amplified with the MDL statute. Those changes represent a departure from the policies of the general diversity statute and render some of the core assumptions of the Erie doctrine inapposite. The central conclusion of this Article is that federal courts hearing complex cases under the jurisdiction of these specialized federal statutes have the power to develop independent federal answers to one key component of the choice-of-law calculus: how to resolve conflicts between the laws of multiple interested states when each would apply its own law to a dispute. Whether federal courts should exercise that power as a matter of policy is a question that this Article leaves for future examination. What is clear, however, is that Klaxon does not hold sway in this class of cases.
ERIE AND THE BIRTH OF MODERN FEDERAL COMMON LAW
The Shift in the Landscape that Surrounded Erie
To appreciate the limited nature of Klaxons ruling, one must begin by reading the opinion against the analytical upheaval that was underway at the time it was written and compare the narrowness with which the Court spoke in Klaxon to the broad exploration of this shifting landscape that it undertook in contemporaneous rulings. When the Court rejected Swift v. Tyson, it set the stage for the creation of modern federal common law. That stage, in turn, provided the proscenium for a reframing of choice-of-law analysis that was already underway.
The 1930s and 1940s were a transformative period in the relationship between state and federal courts. In a handful of years, the business of federal courts sitting in diversity underwent a complete reversal. The era of the Conformity Act (4) and Swift v. Tyson, (5) under which federal diversity courts would apply state law to most questions of procedure but general federal common law to many questions relating to liability, came to an end. In its place came the new dispensation of the Rules Enabling Act (6) and the Federal Rules of Civil Procedure, which established the first uniform law of federal procedure for actions at law, and Erie, which eradicated the general federal common law and recognized state common-law courts as authoritative expositors of liability rules.
At the same time, choice of law was poised for a revolution. In 1934 and 1935, the work of Joseph Beale culminated, respectively, in the publication of the American Law Institute's (ALI) First Restatement of Conflict of Laws, which Beale drafted, (7) and a treatise on the subject published under Beale's own name. (8) Both works sought to preserve and valorize a rule-based, territorial, vested-rights approach to choice-of-law analysis, but these holding actions quickly proved unsustainable. In 1942, Walter Wheeler Cook published The Logical and Legal Bases of the Conflict of Laws, his magnificent account of legal method and purposive interpretation in conflicts analysis. (9) The work of Cook, his contemporary Ernest Lorenzen and successor David Cavers prefigured the more widely-credited work of Brainerd Currie, which would dramatically shift the paradigm of the field twenty years later (10)--a shift in paradigm that had in fact been quietly set in motion in the 1930s when the Supreme Court issued a series of decisions that bookended Beale's work like harbingers, defining the constitutional limits on choice of law in terms of state interests and avoidance of unfair surprise. (11) The Court's iconic 1945 ruling in International Shoe v. Washington, (12) effectuating a similar shift in the cognate field of personal jurisdiction that rejected the strict territorialism of Pennoyer v. Neff (13) in favor of an approach based on state interests and fundamental fairness, came shortly thereafter.
Developments in the field of federal jurisdiction were also underway. Between 1891 and 1925, Congress implemented a series of reforms that established the system of intermediate circuit courts of appeal with which we are familiar today, unifying the nisi prius work of the federal bench into district courts that would thereafter serve as the exclusive courts of original federal jurisdiction for most purposes while giving the circuit courts the last word in most cases and alleviating a decades-long crisis in the workload of the Supreme Court. (14) In the 1920s, motivated in part by this sea change in the structure of the federal judicial system, leading thinkers like Felix Frankfurter and Charles Warren, and also a young Henry Friendly, produced scholarly treatments of the jurisdictional policies of the newly refashioned federal courts that remain important resources to this day. (15) Their work helped to lay the foundation for the understanding that the Court soon embraced in Guaranty Trust v. York that its Erie decision had articulated "a policy of federal jurisdiction," as Justice Frankfurter would put it when given the opportunity to translate his scholarly work into an opinion for the Court. (16)
That understanding of the Erie doctrine was bound up with a newly emerging account of the scope, content and function of federal common law. Following Erie, the Court had to reconsider the proper role of federal courts in crafting federal policy in the absence of express congressional direction. In the process, it had to determine what parts of its Swift-era jurisprudence would survive in the new order. Contemporaneous with that judicial inquiry, during the 1940s, Professors Hart and Wechsler undertook the monumental scholarly project that would culminate in the 1953 first edition of The Federal Courts and the Federal System, (17) the casebook that defined Federal Courts as a coherent field of study distinct from Civil Procedure and worthy of separate attention and facilitated more expansive and sophisticated analysis of the distinctive purpose and function of the federal courts and federal jurisdiction.
From this roiling sea emerged the Court's 1941 decision in Klaxon. Short, simple, and containing little analysis, Klaxon held that a federal court hearing a case in its diversity jurisdiction was required to apply the same choice-of-law rules that would have governed the case had it been brought in a court of the state in which it sits. Klaxon swept away over a hundred years of practice in which the Supreme Court and lower federal courts had issued independent choice-of-law rulings in common law cases. Like so much in the post-Erie years, Klaxon was a revolution. And, like so much in those years, it was merely an initial statement in a complex field that would require further elaboration. The Sections that follow begin that overdue exposition.
The Changes that Erie Wrought
The revolution that Erie brought about in the American legal system operated on multiple levels. Most conspicuously, the decision "overruled a particular way of looking at law," as Justice Frankfurter put it, under which "federal courts [had] deemed themselves free to ascertain what Reason, and therefore Law, required wholly independent of authoritatively declared State law," even in cases where Congress was without power to frame federal rules of decision. (18) In...