Brief Fact Summary. Plaintiffs sued Defendant County for injuries arising out of an airplane accident. The only meritorious count in Plaintiffs’ complaint alleged that Defendant breached its contract with the Federal Aviation Administration (FAA) and Plaintiffs were third party beneficiaries of that contract. Defendant moved to dismiss, arguing that federal law applied, which did not give standing to Plaintiffs as third party beneficiaries from the contract between Defendant and FAA.
Synopsis of Rule of Law. Federal common law does not apply in diversity cases unless the United States’ rights and obligations would be substantially affected by the outcome of the case. A decision that may remotely or upon speculation, affect the United States’ interests is not a strong enough reason to warrant application of federal common law.
Whether latent federal power should be exercised to displace state law is primarily a decision for Congress.View Full Point of Law
Issue. Does the United States have such a strong interest in this case such that federal common law, as opposed to state law, should apply to the issue of whether Plaintiffs have standing to sue?
Held. No. Reversed and remanded.
Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), infra, requires federal law be applied when interpreting the rights and obligations of the United States and when there is a federal interest in uniformity such that applying state law in the situation would create uncertainty.
The Solicitor General of the United States did not brief any issues in this case and stated that he would not do so unless requested by the Court. Therefore, the United States does not feel that its rights would be significantly affected by the outcome of the case.
This case involves private parties and the issues that predominate are essentially local.
Congress has not given a federal cause of action, which emphasizes a further lack of federal interest.
Due to the speculative and remote nature of any federal interest, state law should apply.
Discussion. The opinion shows that the rule articulated in Clearfield Trust Co., infra, requires a determination of the rights and obligations of the United States, not other parties affected. In addition, even though federal law specifically states that a contract does not allow for a federal cause of action, this does not foreclose the possibility of a state cause of action pursuant to the federal law. This is why standing was analyzed under state law, to determine if Georgia law would allow such a cause of action.