ASCERTAINING APPLICABLE LAW

Federal question cases: In federal question cases, federal common law, not state common law, usually applies.

I. NATURE OF PROBLEM

A. Concurrent jurisdiction: The jurisdiction of federal courts is, in most cases, concurrent with that of the state courts. That is, a particular controversy that is litigable in federal court may also, in most situations, be brought in state court. Since the decision whether to use state or federal court is left to the litigants, it becomes important to know whether these two courts will apply the same legal principles.

1. Who chooses: Where jurisdiction of a particular claim is concurrent, the plaintiff makes the initial decision whether to use state or federal court. If he chooses state court, the defendant may sometimes remove the action to federal court.

2. Choosing favorable forum: If jurisdiction in a particular situation is concurrent, and the state courts would apply rules of law different from those which would be applied by the federal court, the plaintiff, and in situations where removal is possible, the defendant, will have an incentive to choose the court more favorable to his case.

a. Forum-shopping: This process of selecting the more favorable court is generally called “forum-shopping.” The undesirability of forum-shopping plays a large role in the cases discussed throughout this chapter.

II. THE ERIE DECISION AND OTHER FUNDAMENTALS

A. Rules of Decision Act: The Rules of Decision Act, 28 U.S.C. §1652, states that in civil actions, the federal courts must apply the “law of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide.” This Act has been in effect (with occasional changes of terminology) since 1789; (Wr., 369). Its interpretation, however, has changed drastically with the decision in Erie Railroad v. Tomp-kins, discussed extensively below.

1. Interpretation: The Rules of Decision Act, together with Article VI of the Constitution, means and has always been taken to mean that the federal Constitution, treaties, and constitutional Acts of Congress always take precedence, where relevant, over all state provisions. This rule applies to proceedings in federal and state courts alike.

2. State statutes: The Act has also always been taken to mean that in the absence of controlling federal provisions, the federal courts will be bound to follow state constitutions and statutes.

3. Dispute about common law: There has been much dispute, however, about what law the federal courts should apply where there is no controlling constitutional or statutory provision, federal or state; that is, where the “law” in question is the so-called “common,” or judge-made, law.