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Guaranty Trust Co. York

    Brief Fact Summary. Plaintiff sued a bond trustee in a Federal diversity action. State
    substantive law governed. Defendant argued that the suit was barred by the state’s statute
    of limitations.
    Synopsis of Rule of Law. A matter is considered substantive, for the purposes of
    determining whether state or Federal law should apply in a diversity action, when it
    significantly affects the result of litigation.


    Facts. Plaintiff York sued a bond trustee in a Federal diversity action alleging
    misrepresentation and breach of trust. New York substantive law governed. Defendant
    Guaranty Trust Co. invoked the New York statute of limitations. Plaintiff argued that the
    statute of limitations did not bar the suit because it was on the equity side of the Federal
    court. The second circuit ruled that the suit was not barred and this appeal followed.

    Issue. What constitutes a substantive issue such that state law will apply in a Federal
    diversity action?

    Held. The Supreme Court of the United States reversed the case and remanded it for
    further proceedings, holding that a matter is considered substantive, for the purposes of
    determining whether state or Federal law should apply in a diversity action, when it
    significantly affects the result of litigation. It is immaterial whether statutes of limitations
    are characterized as either substantive or procedural in state court opinions


    Discussion. Here the Supreme Court reaffirmed the general distinction that in diversity
    cases, state law applies for substantive issues, while Federal law applies for procedural
    issues. However, rather than rely on the label placed on a statute by a state court as either
    substantive or procedural, Federal courts will make their own determination based on
    whether or not the statute is outcome determinative.


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