The Irrepressible Influence of Byrd

• Publication year: 2022

44 Creighton L. Rev. 61. THE IRREPRESSIBLE INFLUENCE OF BYRD

THE IRREPRESSIBLE INFLUENCE OF BYRD

Richard D. Freer(fn*) and Thomas C. Arthur (fn**)

I. Introduction

Byrd v. Blue Ridge Rural Electric Cooperative, Inc.(fn1) is the Rodney Dangerfield of the Erie doctrine.(fn2) The case was decided in 1958 and has never gotten its due. In Hanna v. Plumer(fn3) it was relegated to a perfunctory citation without discussion. Worse, Hanna provided an alternative analysis the "modified outcome" or "twin aims of Erie" test(fn4) to which the Supreme Court of the United States appears devoted.(fn5) By contrast, the Court has discussed Byrd only once. That discussion, in Gasperini v. Center for Humanities, Inc.,(fn6) by the lights of many, was confused and confusing,(fn7) and did not leave Byrd on firm footing.(fn8)

Now the Supreme Court re-enters the thicket in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.(fn9) Typically, Byrd merits only a fleeting citation in the concurring opinion of a single justice.(fn10) Nonetheless, Byrd remains the Court's most comprehensive and cogent effort in vertical choice of law, and actually explains the results in cases in which the Court did not cite it. Indeed, at the end of the day, though it gets no respect, the stamp of Byrd is clear. Each of the three opinions in Shady Grove reflects its influence, if not its command.(fn11)

We set forth four interrelated theses in this article. First, Byrd is the only Supreme Court case since Erie itself to discuss all three of the core interests balanced, expressly or not, in every vertical choice of law case. Second, because Banna's "twin aims" test ignores two of these three core interests, it cannot adequately serve as the standard for cases under the Rules of Decision Act(fn12) ("RDA"). This fact is evidenced by the Court's eschewing the twin aims test in cases, like Gasperini,(fn13) where state and federal interests must be accommodated. Third, as all three opinions in Shady Grove demonstrate, the three interests indentified in Byrd are also present in cases governed by the Rules Enabling Act(fn14) ("REA"). Our final thesis is that the Supreme Court should expressly recognize the applicability of the core interests embraced by Byrd to all Erie doctrine cases and incorporate them into the legal tests for resolving them.

II. THE BYRD CONTRIBUTIONS

The Court decided Byrd before it made clear in Hanna that there are two prongs of analysis in vertical choice of law. First, if there is a federal directive on point, that directive will control the issue, so long as it is valid. That directive may be a Federal Rule of Civil Procedure, the validity of which will be tested in part by the REA. We call this the "REA prong" of the analysis. If there is no federal directive on point, the question is whether Erie itself, including the RDA, compels the application of state law. We call this the "RDA prong" of the analysis.

Byrd was an RDA case because there was no federal directive.(fn15) Still, the case introduced two fundamental principles that animate the whole of vertical choice of law. First is a functional definition of those aspects of state law that a federal court must honor. Second is the recognition of the core interests that underlie judicial federalism.

As to the first point, Justice Brennan's majority opinion started with the most obvious of Erie statements: absent a federal directive, a federal judge "must respect the definition of state-created rights and obligations by the state courts."(fn16) On matters of what might be called "pure substance" for instance, the elements of a claim or defense Erie, the RDA, and the Constitution command the federal diversity court to apply state law. But Justice Brennan's next sentence warrants careful attention: "We must, therefore, first examine the [state] rule ... to determine whether it is bound up with these rights and obligations in such a way that its application in the federal court is required."(fn17) The Erie prescription applies, then, not just to matters of pure substance, but to ancillary rules so closely related as to constitute part of the state's definition of "rights and obligations."

The Court has never defined "bound up." But the idea seems rather clear. Justice Brennan cited Cities Service Oil Co. v. Dunlap(fn18) as authority for the "bound up" principle.(fn19) That case required federal diversity courts to apply the state-law burden of proof at trial. (Later, in Palmer v. Hoffman,(fn20) the Court confirmed this holding.) While allocating the burden of proof does not define when a party is liable to another, it is closely related it determines the winner when no proof is introduced, or when the evidence is in equipoise. This tie-breaking function seems integral to the definition of rights and obligations.

There are other fairly obvious candidates for "bound up." Choice-of-law rules do not decree the elements necessary to establish liability, but prescribe which state's law will make that decree. Thus, the holding in Klaxon Co. v. Stentor Electric Manufacturing Co.(fn21) is consistent with finding choice of law rules "bound up" with pure substance. Similarly, a statute of limitations does not define the elements of a claim, but gives those elements a lifespan. Accordingly, the Court's holding in Guaranty Trust Co. of New York v. York(fn22) is consistent with a finding that that lifespan is "bound up" with the rights and obligations created by state law.(fn23)

The Byrd concept of "bound up" though never defined in so many words and ignored in subsequent cases thus explains several holdings. No one doubts that procedures may be designed for substantive policy reasons to make it easier in a close case for one side to prevail. Indeed, we are familiar with examples of federal provisions that, while not defining liability, are close enough to be mandatory. One is the requirement in public-official and public-figure defamation cases that the plaintiff demonstrate by clear and convincing evidence that the defamatory statement was malicious.(fn24) The Supreme Court required the showing of malice to ensure that defamation suits not chill freedom of expression on matters of public concern. Not satisfied merely with adding a new element to the claim, the Court provided procedural protection for free expression by requiring that the new element be proved by clear and convincing evidence. As a result, public figures will win few defamation cases, and the threat of damages will be less likely to chill public discussion. The special procedural requirement has a substantive function.(fn25)

The second major contribution of Byrd is its recognition of the core interests in judicial federalism. The first of these, clearly, is the state's interest in having its substantive policies judge-made and positive alike respected by federal courts in diversity cases.(fn26) This interest, of course, is at the heart of the constitutional teaching of Erie.(fn27) It is reflected in the Byrd injunction that federal courts apply not only state rights and obligations, but ancillary state laws "bound up" with those rights and obligations.

The second interest is a state's citizens' interest in not being subjected to vertical disuniformity. In Byrd, the Court explained that if state law was not substantive or "bound up," it would be a matter of "form and mode" (which might be a way of saying "procedure"). Here, the court assesses whether the matter is outcome determinative. If so, the federal court should apply the state law unless doing so would harm a countervailing federal systemic interest.(fn28) The Court was careful to explain that state hegemony here is not commanded by the Constitution or RDA. Rather, it is counseled by the "broader policy"(fn29) of Erie. That policy is that "the federal courts should conform as near as may be in the absence of other considerations to state rules even of form and mode"(fn30) that are outcome determinative.

This "broader policy" of "uniform enforcement of state-created rights and obligations"(fn31) avoids the dislocation experienced under the Swift v. Tyson(fn32) analysis. Under that case, when federal courts were free to fashion general federal common law, the citizens of a particular state might have to cope with different rules of law one applied in federal court and one in state court. Under Swift itself, a New York citizen was at a loss when determining whether discharge of a debt constituted valid consideration for a contract. In state court, it did not. In federal court, under general federal common law, it did.(fn33) The broader policy of Erie instructed federal courts to avoid such dislocation by generally applying state law - even as to matters of form and mode. This, in turn, reduced uncertainty by ensuring that like cases are treated alike, regardless of forum, and removed the unfairness caused when out-of-state citizens can select favorable law by invoking diversity of citizenship jurisdiction.

But, Byrd noted, this broader policy is not absolute. It is tempered by the third core interest - the interest of the federal judicial system as an "independent system for administering justice to litigants who properly invoke its jurisdiction."(fn34) Thus, under Byrd, outcome-determinative state law of form and mode is followed "in the absence of other considerations."(fn35) Such "other considerations" include the federal interest...