Incorporated state law.

• Author: Pathak, Radha A.

ABSTRACT

In the familiar case of Erie Railroad Co. v. Tompkins, the Supreme Court held that the Constitution forbade the federal courts from generating a body of general common law and required them instead to apply state substantive law when adjudicating many common-law causes of action. A rich body of scholarly literature and case law has developed to analyze the Erie doctrine and to guide federal courts in interpreting and applying state law when the litigants assert causes of action that have their source in state law (e.g., when a federal court is exercising diversity or supplemental jurisdiction). But those are not the only cases that call upon federal courts to apply state law; rather, state law is often connected to federal law in a way that necessitates its adjudication in federal court. Notably, federal courts must interpret and apply state law that has been incorporated into federal statutes and federal common law. Such "incorporated" state law has received little attention from scholars, but it should be of significant interest because it arises routinely, and the federal court applying incorporated state law is not bound by the Erie imperative to apply state law accurately. This Article seeks to focus attention on the subject of incorporated state law and to explore the potential challenges that it might present.

CONTENTS INTRODUCTION I. FAMILIAR INSTANCES WHERE FEDERAL COURTS ENCOUNTER STATE LAW A. State Law That Applies of Its Own Force ("Erie cases ") B. State Law That Is Antecedent to Federal Law II. FEDERALIZING STATE LAW THROUGH INCORPORATION A. Illustrative Examples 1. State Law Incorporated into a Federal Statute 2. Incorporation as a Matter of Federal Common Law B. The Doctrinal Landscape of Incorporated State Law III. EXPLORING THE UNINTENDED CONSEQUENCES OF EXISTING DOCTRINE A. Conceptual Problems B. Practical Examination: Evans v. Chavis CONCLUSION INTRODUCTION

It has never been the case that the federal judiciary's sole responsibility is to adjudicate questions of federal law. Federal courts did not enjoy general federal question jurisdiction until 1875, about eighty-six years after they came into existence. (1) In contrast, the federal courts have always been empowered to adjudicate lawsuits between parties of diverse citizenship, even when no federal law is applicable. (2) While the federal courts have come to be seen as essential to the enforcement of federal law,3 the exercise of diversity jurisdiction continues to be an important part of their caseload. (4) In exercising this jurisdiction, the federal courts necessarily interpret and apply state law. (5)

But federal courts routinely encounter state law even when enforcing federal law. For example, a litigant may argue that state law is preempted by federal law, violates the U.S. Constitution, or has been previously interpreted by a state court so as to bar collateral review of federal claims. All of these examples potentially require the federal courts to interpret and apply state law. (6)

Much has been written about the interpretation and application of state law by the federal courts in these contexts. For example, rich academic literature (7) and case laws has developed to provide the federal courts with guidance in addressing state law in cases--such as those based on diversity jurisdiction--where litigants assert state-law claims. (9) Similarly, much scholarship (10) and litigation (11) has been devoted to the complex issues presented when the federal courts must address questions of state law because their resolution will affect the adjudication of related questions of federal law. (12)

Comparatively little, however, has been written about the manner in which federal courts should address state law that is embedded within federal (nonconstitutional) law. (13) That subject is the focus of this Article. This topic should be of significant interest because federal statutes and federal common law routinely (and in a wide range of subject areas) incorporate state law. (14) And they do so for many purposes--for example, federal law may define a term with reference to state law; (15) it may look to state law to provide a procedural rule; (16) or it may borrow from state law a substantive rule of decision. (17)

This Article proceeds as follows. Part I rehearses the familiar instances where federal courts encounter state law. Part II contrasts these instances with circumstances in which federal (nonconstitutional) law borrows--i.e., incorporates--state law. Part III then identifies and explores the unintended consequences of existing doctrine regarding this incorporated state law.

1. FAMILIAR INSTANCES WHERE FEDERAL COURTS ENCOUNTER STATE LAW

   1. State Law That Applies of Its Own Force ("Erie cases")

      Ever since the Supreme Court's decision in Erie Railroad Co. v. Tompkins, (18) federal courts have been required to apply state law in a large number of cases. While the precise holding of Erie is the subject of some debate, (19) it is clear that, as a result of Erie and its progeny, the federal courts will often be required to apply state law because they lack the power to apply anything else. That is, in many situations, the source of law that governs liability in a federal court will be a state sovereign. Put yet another way, state law will apply of its own force. (20)

      This category of cases is most easily associated with the exercise of federal diversity jurisdiction, which permits federal courts to adjudicate any lawsuit with complete diversity of citizenship and an amount in controversy exceeding $75,000. (21) It also includes cases heard pursuant to jurisdictional statutes that require only minimal diversity of citizenship--e.g., the Class Action Fairness Act; (22) the Multiparty, Multiforum Trial Jurisdiction Act; (23) and the federal interpleader statute. (24)

      This category is not limited, however, to cases in which the federal adjudicatory power is ultimately based on the diversity or alienage clauses of Article III, Section 2. (25) The exercise of supplemental jurisdiction permits federal courts to resolve state-law claims. (26) Specific grants of federal question jurisdiction also sweep state-created causes of action within the federal judicial power--e.g., federal courts are permitted to hear any "civil proceedings" that are "related to" a bankruptcy case. (27) And federal courts will sometimes have federal question jurisdiction over a state-law cause of action that has a federal issue embedded within it. (28)

      Before Erie, the federal courts were permitted to craft their own common-law rules when adjudicating disputes in which no federal or state statute governed. (29) The Rules of Decision Act required the federal courts to apply the "laws of the several states" as the "rules of decision" in the absence of federal law. (30) But the Supreme Court in Swift v. Tyson (31) interpreted the term "laws" to mean state statutes and state judicial opinions interpreting those statutes, as well as state judicial opinions concerning "real estate, and other matters immovable and intraterritorial in their nature and character." (32) Moreover, "laws" excluded state judicial opinions regarding legal issues "of a more general nature," (33) such as contract law or commercial law. (34) Tort law also came within the purview of general law. (35) As a result, when Harry Tompkins sued Erie Railroad Company after he was injured by a passing train, (36) the federal trial court did not consider itself bound by the standard of liability that the Pennsylvania state court would have applied to the railroad's conduct. (37)

      The facts of Erie are familiar: Tompkins was walking along a path that ran closely parallel to the railroad tracks. (38) As the train passed him, he was struck by an object protruding from the train. He fell to the ground and his right arm was severed by the wheels of the train. (39) According to the defendant-railroad, the Pennsylvania courts would have considered Tompkins to be a trespasser and hence entitled only to protection from the railroad's willful and wanton misconduct. (40) Other jurisdictions would have considered Tompkins to be a licensee and hence entitled to a standard of ordinary care. (41) The federal trial court adopted the ordinary-care approach. (42) Citing Swift, the court of appeals affirmed: the proper standard of care to be exercised by a railroad was a question of general law. Thus the federal trial court was not required to determine the content of Pennsylvania law, but rather was permitted to "exercise [its] independent judgment" as to the issue. (43)

      The Supreme Court reversed, (44) stating, "Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the State." (45) It is clear today that the quoted sentence is not literally true--the U.S. Constitution, federal statutes, and state law are not the only three sources of law that a federal court is permitted to apply to resolve disputes. Even though "[t]here is no federal general common law," (46) there is some federal common law. But it is equally clear that the Supreme Court in Erie was denying the federal court's power to craft a common-law rule to apply in Tompkins's case against Erie Railroad. And since Erie, there have been two lines of cases in which the Supreme Court has grappled with the question of whether the federal courts are required to apply state law because they lack the power to apply anything else. That is, there are two lines of cases in which the federal courts have been prohibited from crafting common-law rules to apply to a situation where no other source of federal law applies.

      The first line of cases is the Erie line: for example, Guaranty Trust Co. V. York, (47) Byrd v. Blue Ridge Rural Electric Cooperative, Inc., (48) Hanna v. Plumer, (49) and Gasperini v. Center for Humanities, Inc. (50) York and Gasperini required the federal courts to apply state...