Citation. 518 U.S. 415, 116 S. Ct. 2211, 135 L. Ed. 2d 659, 1996 U.S.
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New York state law provides that appellate courts are empowered to review the size of jury verdicts and to order new trials when the jury’s award deviates materially from what would be reasonable compensation. Alternatively, the Seventh Amendment provides that the right of trial by jury shall be preserved, and no fact tried by a jury, shall otherwise be re-examined in any court of the United States. The compatibility of these rules, in an action based on New York law, tried in federal court under diversity of citizenship jurisdiction, is at issue in this case.
Synopsis of Rule of Law.
Just as the Erie principle precludes a federal court from giving a state-created claim longer life than the claim would have had in state court, so too does Erie preclude recovery in federal court, which is significantly larger than the recovery that would have been allowed in state court.
Facts.
William Gasperini (Petitioner), a journalist for CBS News and the Christian Science Monitor, reported events within Central America during a seven year period from 1984 through 1990. During this time, Petitioner took over five thousand slide transparencies of war zones, political leaders and daily life in Central America. In 1990, Petitioner agreed to supply his original transparencies to the Center for Humanities, Inc. (Respondent), for use in an educational video entitled “Conflict in Central America.” Petitioner selected three hundred transparencies for use in making the video. However, despite the fact that the Respondent agreed to return the transparencies, when the project was complete, the transparencies could not be located. Petitioner filed suit in the United States District Court for the Southern District of New York, under diversity jurisdiction, alleging several state-law claims for relief, including breach of contract, conversion and negligence. After trial, the jury awarded Petitioner, $450,000. The Respondent moved for a new trial, in part on the grounds of excessiveness in the jury award. The United States Court of Appeals for the Second Circuit vacated the jury award and ordered a new trial, unless Petitoner agreed to an award of $100,000.
Issue.
Whether a federal court can give effect to New York state law without untoward alteration of the federal scheme for the trial and decision of civil cases?
Held.
New York’s law controlling compensation awards for excessiveness or inadequacy can be given effect, without detriment to the Seventh Amendment, if the review standard set out in CPLR Section: 5501(c) is applied by the federal trial court judge, with appellate control of the trial court’s ruling limited to review for abuse of discretion. As a result, the court decided to apply the New York “excessive damages” standard, rather than the federal “shock the conscience” test.
Dissent.
Dissenting opinions were offered by Justice Stevens, individually, and Justice Scalia, with whom the Chief Justice and Justice Thomas joined (Scalia) J. Stevens: Justice Stevens disagreed on the need to vacate the court of appeal’s decision and remand to the district court for it to apply the New York standard. He felt that the appellate court could do so without violating the Seventh Amendment. J. Scalia: The majority’s decision contradicts the principle that the proper role of the trial and appellate courts in the federal system in reviewing the size of jury awards is a matter of federal law. Further, Justice Scalia notes that the majority commits the classic Erie mistake of regarding whatever changes the outcome of a case as substantive. Justice Scalia notes that “outcome-determination” was never meant to serve as a “talisman,” a principle noted by the court in Hanna v. Plumer.
Discussion.
This case presents the situation in which a state statute may be both substantive and procedural in nature. In this case, under state law, the standard for granting a new trial was held to be substantive in nature. Alternatively, the requirement that the appellate court consider whether a new trial shall be ordered was found to be procedural in nature. As a result, a federal trial court, faced with such a factual situation, should determine whether a new trial should be ordered, applying the state standard, rather than an appellate court.
