Erie's four functions: reframing choice of law in federal courts.

• Author: Erbsen, Allan
• Position: Abstract through II. Erie's Assumptions: A Threshold Inquiry into the Doctrine's Underlying Values, p. 579-617

ABSTRACT

This Article seeks to mitigate decades of confusion about the Erie doctrine's purposes, justifications, and content. The Article shows that "Erie" is a misleading label encompassing four distinct components. Jumbling these components under a single heading obscures their individual nuances. Analyzing each component separately helps to clarify questions and values that should animate judicial analysis. The Article thus reconceptualizes the Erie doctrine, offers a more precise account of how Erie operates, and provides a framework for rethinking several foundational aspects of Erie jurisprudence.

2013 marks Erie's seventy-fifth anniversary. The years have not been kind to Erie and its progeny. Decades of jurisprudence have produced as much consternation as enlightenment. Successive generations of students and lawyers have struggled to understand an ever-expanding constellation of opaque precedents. Even mentioning the word "Erie" can invoke feelings of dread. That reaction is unfortunate because the issues that Erie confronts are vitally important and endlessly fascinating. Erie addresses the relationship between governments in a federal system, the division of powers within governments, and the essential elements of the rule of law. So how did a doctrine this central to the constitutional order become a morass of often inscrutable decisions?

Confusion arises in part because what courts and commentators label "the Erie doctrine" comprises four distinct sets of inquiries serving four distinct functions. Erie governs: (1) the creation of federal law; (2) the interpretation of its scope; (3) the prioritization of federal law relative to state law; and (4) the adoption of nonfederal law when federal law is inapplicable. These four inquiries collectively help courts make three kinds of decisions when analyzing choice of law. Courts must determine: (1) which government is an authoritative source of law for a particular dispute; (2) which institution within that government is authoritative; and (3) which rule that institution would endorse. Bundling these distinct functions and choices into a single expansive "Erie "doctrine shrouds decisionmaking in a haze of generalities. Fragmenting Erie into its components highlights how different concerns and criteria are relevant in different contexts, which in turn can help resolve a wide variety of theoretical and practical problems.

The Article provides new insights into several recurring doctrinal puzzles. For example, it considers how choice of law rules in federal court are a form of federal common law and whether Klaxon is an appropriate federal common law rule, which types of state institutions federal diversity courts should emulate and thus whether federal courts should attempt to predict the decisions of a state's highest court, the extent to which federal courts can create common law that incorporates general law (including customary international law), what default rules should guide interpretation of federal laws that might conflict with state laws, and the distinction between statutory and common law under the Supremacy Clause and Hanna's "twin aims" test.

INTRODUCTION I. ERIE'S FUNCTIONS: CREATION, INTERPRETATION, PRIORITIZATION, AND ADOPTION A. Background Principles Shaping the Role that Erie Performs. 1. Basic Elements of the Rule of Law in a System of Divided Power 2. Complications in the United States Federal System 3. The Distinction Between Choosing Governments, Institutions, and Rules B. Swift C. Erie D. An Illustration of Erie in Operation: Standard Oil E. Synthesis of Erie's Central Functions II. ERIE'S ASSUMPTIONS: A THRESHOLD INQUIRY INTO THE DOCTRINE'S UNDERLYING VALUES A. The Puzzle of Positive Constraint: The Constitution and the Rules of Decision Act B. The Puzzle of Non-Positive Constraints: Is Erie a Brooding Omnipresence? III. ERIE'S IMPLEMENTATION: RETHINKING DOCTRINAL PUZZLES A. Creation and the Puzzle of General Law: When Can Federal Common Law Incorporate or Choose General Law Rules that Could Not Apply of Their Own Force? B. Interpretation 1. The Puzzle of Interpretative Canons: Avoiding or Embracing Conflict 2. The Puzzle of Comparisons: Identifying Conflict with State Law C. Prioritization 1. The Puzzle of Erie's Scope: Choice of Law Along Multiple Dimensions of Federalism 2. The Puzzle of Pedigree: Why After Erie Do Courts Still Distinguish Between Statutes and Common Law? D. Adoption 1. The Puzzle of Which State's Law Applies: Klaxon and the Adoption of Non-Federal Law 2. The Puzzle of State Institutional Authority: Federal Common Law and the Focus on States' Highest Courts CONCLUSION INTRODUCTION

The Supreme Court's decision in Erie Railroad Co. v. Tompkins (1) is far more famous and influential than it is clear and informative. Although more than 16,000 judicial decisions and 5,700 law review articles have cited Erie, (2) the opinion provides thin support for its reasoning and little guidance about its implications.

Weaknesses in the opinion have become more troubling as the word "Erie" has evolved from a case name into a doctrinal label. A widely accepted rule emerging from Erie is that "[t]here is no federal general common law." (3) This emphatic and enigmatic departure from precedent was sufficient to resolve the specific dispute before the Court. (4) But subsequent cases have presented myriad permutations on Erie's facts that the holding did not address. These cases have appropriated Erie as a malleable label encompassing concepts that extend far beyond Erie's narrow context. As this "Erie doctrine" has evolved, it has become increasingly more complex and progressively less coherent. Courts and commentators agree that the Erie decision and the ensuing doctrine are often inscrutable, (5) but disagree about why, when, and how.

Ambiguity has arisen in part because Erie's imprecision and importance have combined to transform the opinion into a mirror that reflects the varying interests of its readers. To readers concerned about federalism, Erie becomes a case about the allocation of power between the national and state governments. To readers concerned about separation of powers, Erie becomes a case about the proper role of courts in the process of making law. To readers concerned about the nature of legal authority, Erie becomes a case about the origins of legal rules and proper methods for ascertaining their content. There is enough grist in Erie to support each of these perspectives and enough mystery to preclude endorsing any one of them over the others.

The decision's amenability to multiple interpretations has led commentators to inflate Erie into an almost mystic emblem encompassing multiple aspects of lawmaking in a federal system. (6) The "Erie" label tends to obscure more than it clarifies as courts and commentators try to delve through layers of gloss in an effort to resolve specific problems.

A better approach is to puncture Erie's mystique by recognizing that the Erie label encompasses several doctrines that are best understood separately. Isolating each subsidiary doctrine eliminates distractions, highlights salient questions, and helps illuminate new ways of thinking about recurring puzzles that have befuddled courts for decades.

Erie's seventy-fifth anniversary is an opportune moment to reassess the ensuing doctrine's basic premises and framework. The key to understanding how the Erie doctrine should operate is to recognize why it exists; doctrinal form follows doctrinal function. This Article therefore approaches Erie from an atypical direction. Rather than starting with a specific dispute and looking backward to Erie for guidance, I start by considering the kind of guidance that is necessary in particular contexts. This approach identifies the role that the Erie doctrine is attempting to play, which in turn allows for a refined inquiry into how it can best fill that role in particular contexts.

Despite its imprecision, the Erie doctrine serves an essential function by governing the allocation of regulatory authority in a federal system. The Constitution divides power among the federal and state governments and between the federal legislative, executive, and judicial branches. States likewise allocate power among institutions with varying degrees of authority to create and interpret state law. The abundance of empowered lawmakers inevitably leads to conflicting claims of regulatory authority. Mechanisms are necessary to resolve these conflicts by determining which governments and which institutions are authorized to supply binding rules in particular circumstances. Erie is one such mechanism. If the Erie doctrine did not exist, the Supreme Court would have to invent something like it. If the doctrine is dysfunctional, the Court should improve it.

The Article proceeds in four steps. Part I concludes that what is commonly known as the "Erie doctrine" is really a composite of four doctrines governing four distinct phenomena: creation of federal law, interpretation of its scope, its prioritization relative to state law, and the adoption of non-federal law when federal law is inapplicable. These four doctrines collectively help courts make three kinds of choices, rather than a single amorphous choice of "law." Courts must choose an authoritative government, an authoritative institution within that government, and a rule that the institution would endorse. Part I also situates Erie in a broader context by analyzing how federalism and separation of powers complicate choice of law and by identifying basic "rule of law" values that animate choice of the law in the federal system.

Fragmenting Erie into its components and carefully parsing the choice of law inquiry demystifies current doctrine by allowing for a more precise account of the issues confronting courts in particular cases. Parts II and III illustrate the utility of this precision. Part II considers whether different values might animate...