Erie Railroad Company v. Tompkins
ERIE RAILROAD COMPANY V. TOMPKINS,
ERIE RAILROAD COMPANY V. TOMPKINS, 304 U.S. 64 (1938). The Judiciary Act of 1789 provides that in diversity-of-citizenship cases (those cases concerned with citizens of different states, and not with federal statutes or the Constitution) federal courts must apply "the laws of the several states, except where the Constitution, treaties, or statutes of the United States shall otherwise require." In 1842, in Swift v. Tyson, the Supreme Court held that the word "laws" meant only state statutory law; and therefore federal courts were free to ignore state common law and to fashion and apply their own, at least with regard to commercial matters. Nearly a century later, in Erie v. Tompkins, on dubious historical evidence, and perhaps without understanding that Swift's scope was limited to the kind of commerce that was interstate in nature, the Court overruled Swift as both a misinterpretation of the Judiciary Act and an unconstitutional assumption of power by federal courts.
Erie now generally requires that federal courts exercising jurisdiction in diversity-of-citizenship cases apply both applicable state statutory law and common law. Justice Louis Brandeis, in his majority opinion for the Court in Erie, ruled as he did because of a fear of over-reaching federal courts, but recent scholarship has suggested that, in overruling Swift, the Court may have deprived the nation of some benefits of the development of federal commercial jurisprudence.
Purcell, Edward A., Jr. Brandeis and the Progressive Constitution: Erie, the Judicial Power, and the Politics of the Federal Courts in Twentieth-Century America. New Haven, Conn.: Yale University Press, 2000.