The Head-on Collision of Gasperini and the Derailment of Erie: Exposing the Futility of the Accommodation Doctrine

• Publication year: 2022

44 Creighton L. Rev. 191. THE HEAD-ON COLLISION OF GASPERINI AND THE DERAILMENT OF ERIE: EXPOSING THE FUTILITY OF THE ACCOMMODATION DOCTRINE

THE HEAD-ON COLLISION OF GASPERINI AND THE DERAILMENT OF ERIE: EXPOSING THE FUTILITY OF THE ACCOMMODATION DOCTRINE

ARMANDO GUSTAVO HERNANDEZ(fn*)

I. INTRODUCTION

Despite the common sentiment among law school students that cases such as Erie Railroad Co. v. Tompkins(fn1) and Hannah v. Plummer(fn2) made Civil Procedure the toughest first-year course, simplifying concepts is the key.(fn3) Dating back 2,000 years, early Greek philosophers struggled with the conundrum of squaring a circle.(fn4) Aristotle logically pointed out that a square is not a circle, nor is a circle a square.(fn5) Children encounter this basic truth when faced with the daunting task of fitting wooden pegs of certain shapes into their corresponding silhouette. It becomes apparent that the square peg cannot fit into the circular cut-out, no matter how many splinters are suffered trying. Except for sawing-off the edges of the square, in essence rounding it out, the square had no place in the circle's properly designated spot. Assume, for the purposes of this Article, that federal interests will be categorized as the circle, and conversely, state interests will be represented by the square. Applying this geometric metaphor to the civil procedure dilemma of whether state or federal law controls in a federal diversity action,(fn6) one arrives at the nostalgic conclusion that it is impossible for the circle to be congruous to the square.

The United States Supreme Court decided Gasperini v. Center for Humanities, Inc.(fn7) during its 1995-1996 term.(fn8) The issue before the Court was whether a federal court sitting in a diversity action should apply state law (the square) or federal law (the circle) in examining the excessiveness of a jury award.(fn9) Justice Ruth Bader Ginsburg, writing the majority opinion, framed the Court's reasoning around determining the compatibility of the New York provision and the Seventh Amendment's(fn10) Re-examination Clause.(fn11) As part of tort reform legislation, the New York legislature passed section 5501(c)(fn12) with the intention of creating a soft cap on inflated compensatory and punitive damage awards.(fn13) The New York law provided that the appellate division must utilize a deviates-materially-from-comparable-compensation standard to determine the issue of excessiveness.(fn14) The traditional approach taken by federal courts had been an abuse of discretion review involving a shock the conscience examination.(fn15) The federal approach employed a much broader criterion than the New York standard because it required greater deference for the trial court's determination.(fn16)

The Gasperini Court held that appellate review of excessive jury awards was not in conflict with the Seventh Amendment's Re-Examination Clause.(fn17) However, more importantly, and central to this Article's focus, the Court held that the federal shock the conscience standard was controlling on the appellate court.(fn18) Thus, the federal law prevailed as far as the vertical tension between state and federal choice-of-law at the appellate court level.(fn19) Microscopically examining this portion of the opinion, the Court's logic represented a proper application of precedent.(fn20) Consequently, the Court compounded its brief clarity by holding that New York's "deviates materially"(fn21) standard could be implemented at the federal trial court level without any detriment to federal interests.(fn22) The salient consideration for accommodation was whether "federal courts can give effect to the substantive thrust of § 5501(c) without untoward alteration of the federal scheme for the trial and decision of civil cases."(fn23) The Gasperini Court found both state and federal interests could be accommodated.(fn24) "The Court determined that the federal interest in narrowly limiting appellate review for excessiveness and the New York interest in broadening judicial review for excessiveness could both be given effect without disrupting the scheme of the federal courts."(fn25) Having federal and state interests cohabitate in the realm of Erie jurisprudence was a novel concept.(fn26)

Over a decade later, Gasperini has been followed fifty-five times, criticized once, and distinguished on eleven occasions.(fn27) The greater majority of cases that have followed Gasperini cite to its broader holding that appellate review of excessive jury awards does not offend the Seventh Amendment's Re-Examination Clause.(fn28) However, the progressive rule etched out by the majority in Gasperini - to accommodate when possible - has seldom been applied.(fn29) There are particular cases that demonstrate the accommodation doctrine has been waning.(fn30) The facts in Gasperini presented a unique situation permitting for such an ad hoc solution.(fn31) The ramification of the accommodation doctrine is the state of turmoil, uncertainty, and improbability to which traditional choice-of-law analysis has been reduced to in light of the unusual harmony struck by the Gasperini Court.

Gasperini is an exemplar of the impossibility of squaring the circle.(fn32) Part II of this Article explores the basic principles for understanding the inner-workings of Erie jurisprudence and exactly how accommodation became prevalent in that analysis. Although accommodation, post-Gasperini, is now an integral factor to examine when determining which body of law applies in a diversity suit-it has proven to be an inefficient, unworkable, and enigmatic precedent. In Part III, this Article outlines the most important cases in which federal courts of appeals and district courts sitting in diversity have struggled with accommodation in the wake of Gasperini. Each case presented poses a different conflict between state and federal law concerning such matters as entry of judgments, declaratory judgments, or attorney's fees. However, all of the cases reveal the same truism- accommodation is pointless. By deconstructing the accommodation doctrine to expose its flaws and impractical nature, Part IV of this Article will make apparent that the ideal remedy is for the Supreme Court to rid Erie jurisprudence from this notion of accommodating.

II. THE INNER CIRCLE: ERIE'S PROGENY

Beginning with the seminal case of Erie R.R. Co. v. Tompkins,(fn33) the United States Supreme Court declared that a federal court in a diversity action must apply federal procedural law and state substantive law.(fn34) In Erie, the plaintiff was injured by an open door while he was walking alongside a railroad track.(fn35) He subsequently brought suit against the railroad company.(fn36) The lower courts in Erie were required to make a distinction under tort law as to the status of the plaintiff-pedestrian in order to determine what duty the defendant-railroad company owed him.(fn37) The question for decision was whether the longstanding Swift v. Tyson(fn38) doctrine(fn39) should be disapproved.(fn40) The Rules of Decision Act(fn41) and the Rules of Enabling Act(fn42) provided the underlying rationale for distinguishing between procedure and substance. For appellate courts to continue to apply the Swift doctrine-creating federal common law and abridging state substantive rights-was an unconstitutional usurpation of power and a grave misinterpretation of the Rules of Decision Act.(fn43) From this justification sprouted the twin aims of Erie-ensuring equal protection of the law and deterring forum shopping.(fn44)

Seven years later, Guaranty Trust Co. v. York(fn45) augmented the basic precepts of Erie by creating the outcome-determinative test.(fn46) The clash between state and federal law in that case arose because the plaintiff brought a claim that, pursuant to applicable state law, was barred by the statute of limitations.(fn47) However, the federal trial court judge decided to ignore the state law and apply the federal equitable doctrine of laches,(fn48) which allowed the plaintiff to proceed with the cause of action.(fn49) Justice Felix Frankfurter, writing the opinion for the Court, asserted:

The question is whether such a statute concerns merely the manner and the means by which a right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance in the aspect that alone is relevant to our problem, namely, does it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?(fn50)

Accordingly, the Supreme Court held that a federal court must apply the state's statute of limitations because a statute of limitation is considered a matter of substantive law for Erie purposes.(fn51) The state law governed because to hold otherwise would have an impact on the outcome of the case.(fn52) York stood for the assertion that the outcome of a diversity case should be identical in federal court as it would be in state court, to the extent that legal rules have a bearing on affecting the outcome.(fn53) This outcome-determinative test paralleled and emphasized the importance of consistent outcomes, equal protection, and forum shopping in Erie.(fn54) However, conceivably any rule could affect the outcome of a case.(fn55) Thus, the Supreme Court did not place any limits on the application of this...