Swift v. Tyson

Swift v. Tyson, 16 Pet. (41 U.S.) 1 (1842), argued 14 Jan. 1842, decided 25 Jan. 1842 by vote of 9 to 0; Story for the Court. In Swift v. Tyson, the Supreme Court established the freedom of the federal courts to follow principles of general commercial law, even if those principles were contrary to judicial decisions of the state in which the federal court sat. In Swift, New York defendants were sued in a New York federal district court on a bill of exchange made by them and transferred to a nonresident. The defendants invoked New York decisions under which the instrument was defective, but the plaintiffs argued that the general interstate commercial law would uphold the instrument.

The conflict between the New York cases and commercial decisions elsewhere implicated section 34 of the Judiciary Act of 1789, which required federal courts to follow state “laws” whenever they were applicable. Thus the Court had to decide whether New York decisions were “laws” that federal courts were required to follow. Justice Joseph Story wrote:
In the ordinary use of language, it will hardly be contended that the decisions of courts constitute laws. [Section 34 does not] … apply to questions of a more general nature, not at all dependant local statutes or local usages. … As for example, to the construction of ordinary contracts of other written instruments, and especially to questions of general commercial law, where the state tribunals are called upon to perform the like functions as ourselves, that is, to ascertain upon general reasoning and legal analogies, what is the true exposition of the contract or instrument or what is the just rule furnished by the principles of commercial law to govern the case. (pp. 18–19)

Swift was a case falling within the diversity jurisdiction of the federal courts. It did not fall within the exclusive lawmaking authority of New York. The New York decisions cited by the defendants were themselves based upon “general commercial law,” that is, the common commercial custom and jurisprudence applicable to multistate business transactions. Thus Story determined that the New York decisions were not “laws” in the sense of being some fixed and definite pronouncement by the sovereign state of New York but were rather attempts by New York courts to articulate the content of commercial custom common to all the states and, as such, were wrong.

A federal court had no reason to regard as a matter of constitutional law the New York decisions as the sole and exclusive governing rule in an interstate commercial transaction. New York opinions addressed multistate general commercial law, as defined by judicially recognized commercial custom. Story compared the New York decisions to the general body of multistate commercial law and found them to be wrong.

Therefore, the Swift opinion was not meant to determine the substantive content of New York commercial law but rather was intended to vindicate plaintiff's reliance on the general and accepted commercial rule. By his skillful handling of the federalism issue, Story limited the ability of local precedent to upset the reasonable expectations of parties in interstate commercial dealings. He affirmed the power of the federal courts as independent tribunals to invoke established general commercial rules already embodied in judicial precedent. He thereby freed interstate commercial transactions from disruptive local aberrations. At a critical time in the nation's commercial development, Story encouraged independent federal courts to nationalize commercial rules and established the law merchant and its mature body of predictable and efficient rules in national and international commerce. The Swift decision was thus critical in preventing the balkanization of the commercial law that might have otherwise occurred.

In 1938, the Supreme Court in Erie Railroad Co. v. Tompkins repudiated Swift. Story's theory of adjudication as the resolution of disputes under customary standards evolved from private conduct was incompatible with Justice Louis D. Brandeis's scientific positivism, under which an applicable legal rule could come only from the command of the state. His rejection of Swift thus represented a transition from nineteenth‐century liberalism, concerned with a self‐ordering society operating within a federal legal system composed of coequal sovereign states subject to traditional choice‐of‐law rules, to the modern state as exclusive lawgiver.

See also Capitalism; Federal Common Law; Federalism; Judicial Power and Jurisdiction; Lower Federal Courts.

Bibliography

Tony A. Freyer , Harmony and Discourse: The Swift and Erie Cases in American Federalism (1981).

Robert Randall Bridwell