General law in federal court.

• Author: Bellia, Anthony J., Jr.
• Position: Introduction through I. The Distinction Between General and Local Law, p. 655-693

TABLE OF CONTENTS INTRODUCTION I. THE DISTINCTION BETWEEN GENERAL AND LOCAL LAW A. Local Law and General Law B. Judicial Adherence to the Distinction 1. Local Law in Federal Court a. State Statutes b. Unwritten Local Law 2. General Commercial Law in Federal Court C. Swift v. Tyson in Historical Context II. THE BREAKDOWN OF GENERAL AND LOCAL LAW A. State Efforts to Localize General Law B. Federal Judicial Efforts to Generalize Local Law C. Erie and the Supremacy Clause III. GENERAL LAW IN FEDERAL COURT AFTER ERIE A. Matters Within State Authority B. Matters Beyond State Authority 1. Territorial Integrity and Absolute Equality of States 2. Foreign Relations Powers of the Political Branches a. The Act of State Doctrine b. Head of State Immunity CONCLUSION INTRODUCTION

Conventional wisdom maintains that the Supreme Court banished general law from federal court in 1938. In Erie Railroad Co. v. Tompkins, the Court famously declared that "[t]here is no federal general common law." (1) In so doing, the Court overruled its 1842 decision in Swift v. Tyson. (2) Modern accounts start from the premise that Swift and Erie represent irreconcilable conceptions of federal judicial power, but this premise is mistaken. According to these accounts, Swift viewed the common law as a "brooding omnipresence," rather than a sovereign act, and authorized federal courts to disregard state common law in favor of general common law of their own choosing. (3) Erie, by contrast, constrained such judicial lawmaking by interpreting the Constitution to banish general law from federal courts in the face of contrary state law.(4) Because the Erie Court concluded that "the unconstitutionality of the course pursued" was "clear," it felt compelled to overrule Swift and abandon a doctrine that had been "widely applied throughout nearly a century." (5) The effect of this decision, it is said, was to prohibit federal courts from applying general law unless it qualifies as state law or, more controversially, as "federal common law." (6)

Although we agree that Erie rests on constitutional grounds, it does not follow that Swift was unconstitutional when it was decided or that the Constitution prohibits federal courts from applying general law under any circumstances. To the contrary, Swift and Erie represent compatible conceptions of federal judicial power when each decision is understood in its full historical context. In our view, Erie is best read as recognizing that federal courts must apply state law unless required to disregard such law by the Supremacy Clause. At the time Swift was decided, state common law largely incorporated general commercial law. General commercial law, or the law merchant, referred to shared commercial customs and practices among nations. General law was distinct from local law, which referred to law that applied only within the territorial jurisdiction of a particular sovereign. At the time Swift was decided, a federal court's application of general commercial law did not implicate the Supremacy Clause because federal and state courts alike did not understand general commercial law to be the law of a particular state. Accordingly, when federal courts applied general commercial law, they did not displace state law, but rather acted in accord with a state's choice to apply general commercial law.

The relevant distinction at the time was not between general law and state law, but between two kinds of state law: general law and local law. General law was "an identifiable body of rules and customs developed and refined by a variety of nations over hundreds and, in some cases, thousands of years." (7) Such law addressed matters of concern to more than one sovereign, and no single sovereign had the ability to fix its meaning. Thus, nations and states used independent judgment to ascertain the content of general law, and voluntarily applied such law in order "to foster peaceful coexistence and to facilitate mutually beneficial transactions among their citizens." (8) Local law, by contrast, governed "rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature and character." (9) In England, the common law included both general and local law, and the states adopted the common law following independence. Swift acknowledged that federal courts exercising diversity jurisdiction were bound to follow state decisions on matters of local law. Because the issue in Swift was one of general commercial law, however, neither state nor federal courts understood the applicable law to be local to any particular sovereign. This meant that federal courts--like state courts--were expected to use independent judgment to ascertain the applicable rule of decision.

Although Swift was defensible when decided, the "Swift doctrine" that federal courts subsequently developed was problematic for two reasons. First, states increasingly exercised their prerogative to replace general commercial law with local law through both judicial decisions and state statutes. (10) This development rendered the federal courts' continued application of general commercial law in diversity cases constitutionally problematic. Second, federal courts steadily expanded their application of general law to matters historically governed by local law, such as torts and even real estate transactions. (11) In practice, these two developments meant that federal courts often disregarded state law with no warrant in the Supremacy Clause for doing so. As a result, the law applied to similarly situated litigants increasingly varied depending on whether the case was tried in state or federal court. (12) Erie eliminated this disparity by holding, as a matter of constitutional law, that federal courts must apply state law--whether written or unwritten--unless such law is preempted by the Constitution, acts of Congress, or treaties. (13)

Understood in historical context and in light of the constitutional structure, Swift and Erie establish that there is no categorical constitutional prohibition against the application of general law in federal court. Rather, the application of such law is problematic only when it disregards state law with no basis in the Supremacy Clause for doing so. (14) At the Founding, general law was synonymous with jus gentium, or the law of nations. (15) Courts and other writers recognized various branches of the law of nations, including the law merchant (or general commercial law), the law maritime, and the law governing relations between sovereign states. (16) In drafting Article III, the Founders fully expected federal courts to apply these branches of the law of nations in appropriate cases. (17) Article III extended the federal judicial power not only to cases arising under the Constitution, laws, and treaties of the United States, but also to cases in which general law was likely to apply, such as diversity cases between merchants, admiralty and maritime cases, and cases affecting ambassadors. Consistent with these expectations, federal courts applied the law merchant, the law maritime, and the law of state-state relations in appropriate cases within their jurisdiction.

Initially, courts paid little attention to whether they should classify general commercial law as state law because at the time little turned on that classification. (18) In England, the common law incorporated much of general law as a set of default rules until changed by Parliament. In the United States, the states received the common law--and hence much of general law--as their own background law subject to future alterations. Early acts of Congress generally required federal courts to apply state forms of proceeding and state rules of decision in actions at law unless preempted by enacted federal law. Although these directives required federal courts to respect a state's choice whether to apply general commercial law or local law to particular disputes, federal courts did not understand these statutes to require deference to state court understandings of general law. Because no sovereign had unilateral authority to prescribe the content of general law, the courts of each sovereign exercised independent judgment to determine its content and expected the courts of other sovereigns to do likewise. Thus, it was largely immaterial whether federal courts classified general commercial law as part of state common law or as some other source of law. Either way, federal courts were free to exercise independent judgment regarding the content of general law.

By the late nineteenth century, however, state abandonment of general commercial law and federal court expansion of the scope of general law created a growing dichotomy between the law applied in state and federal courts. (19) Increasingly, state courts applied local state law and federal courts applied so-called "general law" to the same kinds of disputes. As a result, judges frequently applied different rules of decision to similar cases based solely on whether the case was brought in state or federal court. Erie responded to the states' permissible localization of general law and the federal courts' improper generalization of local law by holding that--in the absence of supreme law of the land to the contrary--the Constitution requires federal courts to follow state law, including state common law as defined by state courts.

To reach this conclusion, the Court implicitly invoked the negative implication of the Supremacy Clause. (20) Each source of federal law recognized by the Supremacy Clausemthe Constitution, laws, and treaties of the United States--can only be adopted pursuant to procedures that require the participation and assent of at least two actors subject to "the political safeguards of federalism": the House of Representatives, the Senate, and the President. (21) More importantly, each source of supreme federal law can...