The repressible myth of Shady Grove.

Author:Clermont, Kevin M.

This Article untangles the effects of the Supreme Court's latest word on the Erie doctrine, by taking the vantage point of a lower court trying to uncover the logical implications of the Court's new pronouncement. First, Shady Grove lightly confirms the limited role of constitutional constraints. Second, it sheds only a little light on judicial choice-of-law methodology. Third, by contrast, it does considerably clarify the conflict between Federal Rules and state law: if a Rule regulates procedure, then it is valid and applicable without exception in all federal cases, to the extent of its coverage; in determining the Rule's coverage, federal courts should, when alternative readings are defensible, read it to minimize its intrusion on substantive rights (that is, they should construe a Rule in a fashion that includes considering the impact on the generalized congressional and state interests in regulating substance, but they should not adopt a narrowed construction just to avoid conflict with the state's interests peculiarly in play in the particular situation presented by the case at bar). In the end, Shady Grove has not fundamentally altered Erie, but it mercifully makes the current interpretation more comprehensible.

INTRODUCTION I. THE CONSTITUTION A. Condition of Prior Law 1. Institutional Framework on Vertical Choice of Law 2. Constitutional Limits on Federal Lawmaking. B. Contribution of Shady Grove II. THE "UNGUIDED ERIE CHOICE" A. Condition of Prior Law B. Contribution of Shady Grove III. THE FEDERAL RULES REALM A. Condition of Prior Law 1. Sibbach-Hanna 2. Federal Rules' Scope B. Contribution of Shady Grove 1. Sibbach-Hanna a. Sibbach Pillar b. Hanna Pillar c. Summary 2. Federal Rules' Scope a. Three Opinions b. Standard for Rules' Construction c. Federal Rule 23's Coverage d. New York Statute's Coverage e. Summary 3. Implications a. Class Actions b. Summary Judgment c. Pleading Rules CONCLUSION INTRODUCTION

Endless writing on the subject of the Erie (1) doctrine has produced strikingly little agreement. One of the few undisputed points is oddly this: the most influential article ever written on the subject was John Hart Ely's The Irrepressible Myth of Erie. (2) In the latest word of the Supreme Court on the topic, Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., (3) his classic article was one of only two Erie articles cited in the Justices' opinions and the only one cited more than once. (4)

In that article, focusing exclusively on the corner of federal actions based on diversity jurisdiction, (5) but being in a special position to perceive the lessons of the recent Hanna v. Plumer (6) case, Professor Ely brilliantly dissected the hitherto amorphous unity that had been the Erie doctrine. Hesaw it to pose a set of three distinct questions arising under the Constitution, the Rules of Decision Act (RDA), (7) and the Rules Enabling Act (REA) (8)--concerning, respectively, the Congress's power to make the vertical choice of state or federal law, the federal courts' choice of law when unguided by statute or Rule, and those courts' choice of law when a Federal Rule was on point. (9) The doctrine's structure was never the same thereafter.

By contrast, the answers he gave to the three questions (l0) were not completely satisfying. (11) In any event, his efforts failed to put the questions to rest, either for lower courts or for scholars. (12) His article ended up being influential more for structure than for content.

After Ely, the Erie doctrine continued its evolution. The law today is that the Constitution or Congress may make a definitive choice of law. Otherwise, the vertical choice of law is left to the courts' methodology. The seeming exception is that federal law prevails when a Federal Rule covers the matter. Beyond those generalities, however, debate rages as to the details.

Shady Grove is the Supreme Court's latest contribution to that debate. As always, the latest word has caused a stir, and once again created hope of finally settling at least some of Ely's questions. But in my belief, the newest case does little to move the Erie doctrine. It does not say much as to definitive doctrine, and only partly because of its splintered opinions. It will find any greatness more in the world of class action practice. Any great significance attributed to Shady Grove in the Erie debate is a myth. (13)

Nevertheless, Shady Grove, when read along with the Court's preceding major case entitled Gasperini v. Center for Humanities, Inc., (14) does point in the right direction for answering Ely's questions. On some of the questions, it conforms to and affirms an emerging consensus. Yet on others, it serves to show that certain issues remain quite open. So, study of Shady Grovgs setting in the Erie doctrine is worthwhile, even if not paradigm shifting.


    The role of the Constitution in the current operation of the Erie doctrine has, rather unusually, generated the least disagreement. The reason is that it properly plays a small role, verging on an irrelevant one. The doctrinal battles have instead raged in a realm far from the theoretical limits imposed by the Constitution. Thus, those otherwise important limits remain vague. (15)

    1. Condition of Prior Law

      1. Institutional Framework on Vertical Choice of Law

        To understand as a whole the big picture of choice of law within federalism, one must first reconsider the institutional structure, including the constitutional and congressional powers to limit judicial choice of law. The federal government may make the choice between state and federal law by its ordinary hierarchy of lawmakers: the federal Constitution at the top, Congress (or its authorized administrative delegate), or the federal courts by default. If the Constitution or Congress expressly or impliedly made the choice of law, that choice is binding on the federal courts. Only in the absence of such a constitutional or congressional directive must the federal courts decide whether state or federal law applies.

        The Constitution, in addition to authorizing the making of federal law, could itself have dictated that federal law govern particular points, and of course any such choices are binding. An example is the Seventh Amendment's guarantee of trial by jury: the constitutional jury right directly governs in all federal court cases, (16) although not in the state courts. (17) Most often, however, the Constitution did not so dictate that federal law must apply.

        Where the Constitution did not choose federal law, the Constitution might have instead prohibited the federal authorities from choosing to apply too much federal law. That is, the Constitution could choose state law, by prohibiting or simply by not authorizing the making of federal law. Indeed, it generally did so in establishing the limited federal government. (18)

        In many circumstances, however, the Constitution did not choose, leaving Congress able to make a valid choice by statute in favor of federal law or of state law. That is, within the just-described constitutional limits lying at the two extremes, the Constitution neither chose federal law nor dictated state law, and so left Congress free to choose between federal and state law. In particular, Congress can choose the law for actions litigated in federal court, and its choice whether express or implied will bind the federal courts. (19) If Congress chooses the applicable law, the only vertical choice-of-law question remaining for the courts is whether the congressional choice was constitutionally valid, because the Constitution imposes the only bounds on the congressional power. (20)

        If Congress opts for the choice of federal law and hence preempts state law, it usually specifies the content of that federal law, (21) but it sometimes delegates to the federal courts the task of generating part or all of that federal law. (22) It is important to keep clear this distinction between choosing the applicable law and making up its content. Nonetheless, Congress's powers to choose and to make federal law are equivalent.

        Only in the absence of both a constitutional and a congressional directive can the federal courts validly choose to apply federal or state law. The federal courts are not then determining whether preexisting federal law already covers the question--because if the law did, the courts would not be dealing with a situation of silence by the lawmakers above the courts in the lawmaking hierarchy. Instead, the courts must look at federalism policies somehow to decide if federal law should govern. If so, and because that federal law does not already exist, the courts then must create the federal law, most often by analogy or adoption. That is, once the courts choose federal law, they must extend federal law by creating specialized federal common law, which thereafter exists and applies by stare decisis. (23)

        It is useful to recognize that the federal courts' choice-of-law power therefore equates to a lawmaking power. The outer boundary on the federal courts' power to choose federal law equates to a judicial lawmaking power because, whenever the federal courts choose on their own to apply federal law, there is no federal law and so they are extending and hence making federal law. (24) Therefore, the same constitutional limit applies to both powers. (25)

      2. Constitutional Limits on Federal Lawmaking

        Accordingly, the federal legislature and also (when that legislature is silent) the federal courts can choose and make federal law, subject to the constitutional limit on each of them. Those limits, although rooted in federalism, permit significant lawmaking activity by the federal government.

        Yet limits must have some teeth, however stubby. Therefore, it is worth considering what their bite is. Here we enter a more controversial realm, as we turn to the role of the Constitution in producing the Erie Railroad Co. v. Tompkins decision itself and to the...

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