Brief Fact Summary. Plaintiff, a resident of North Carolina, sued Defendant, a South Carolina corporation, in South Carolina federal court for negligence. A jury returned a verdict for Plaintiff. Defendant appealed, arguing that the question of whether Defendant was immune from suit pursuant to the South Carolina Workmen’s Compensation Law was to be decided by the judge, not the jury according to South Carolina law.
Synopsis of Rule of Law. When a state law conflicts with a federal law and the state law does not involve rights and obligations, the federal law must be applied. The court should not only look to whether the state law would be “outcome determinative” but also whether applying the state law would hinder the functioning of the federal court.
Issue. When state law conflicts with federal law in determining whether an action should be tried by a judge or jury, which law should control where the case is to be tried in a federal court exercising diversity jurisdiction?
Held. A federal court should conduct jury trials when required by the 7th Amendment. Reversed and remanded.
The policy of uniform enforcement of state-created rights and obligations cannot require compliance with a state rule that does not involve rights and obligations of its citizens and disrupts the federal system of allocating functions between judge and jury. This policy would alter the essential character and function of a federal court.
Although a judge may reach a different decision than a jury in this case, state law is not applied in every situation where doing so might be outcome determination. Rather, federal interests, such as conformity with the 7th Amendment must be considered.
Because this rule is procedural and the conflict interferes with federal functions, it is not considered a decision under the Rules of Decision Act.
Discussion. Although the test for determining whether a state law should be applied under Erie is whether it is “outcome determinative,” the court must weigh the state’s interests in applying its own law against the federal interest in applying federal law.