Citation. 41 U.S. 1 (1842)
Plaintiff sued Defendant to enforce payment of a debt, transferred from a third party to Defendant. Defendant argued that, under New York common law, the debt was not enforceable because of fraud.
In cases before a federal court under diversity jurisdiction, the federal court may apply federal common law instead of the state common law.
George Tyson (Defendant) bought land in Maine from Nathanial Norton and Jairus Keith with a bill of exchange. Norton and Keith gave the bill of exchange to John Swift (Plaintiff) to pay off a previous debt. However, Defendant refused to pay the bill of exchange to the Plaintiff, arguing that Norton and Keith never actually owned the land in Maine. Plaintiff sued Defendant in New York federal court under diversity jurisdiction, arguing that he was entitled to payment because he was a holder in due course. Defendant argued that there was no valid consideration to pay the debt.
When a case is brought in federal court under diversity jurisdiction, must the federal court apply the common law of the state?
No, the federal court does not have to apply the common law of the state.
The Court determined that federal courts were not required to apply the common law of the state when reviewing a case under diversity jurisdiction. Looking to the language of Section 34 of the Federal Judiciary Act of 1789, the Court determined that the Act only applied to state statutory law, and federal courts were free to apply their own federal common law.