326 U.S. 99 (1945)
Justice Frankfurter delivered opinion
Facts:
- Plaintiffs sued bond trustee in federal diversity action alleging misrepresentation and breach of trust
- New York substantive law governed
- Defendant invoked statute of limitations
- Plaintiffs argued statute of limitations didn't bar suit because it was on the "equity side" of federal court
- Courts of equity considered length of time between maturing of claim and bringing of suit but didn't find themselves traditionally bound by statute of limitations (why not? what's different about courts of equity?)
- Second Circuit ruled plaintiffs' suit was not barred but Supreme Court disagreed
Under what circumstances are the federal courts bound by state law in a diversity action?
Holding: Where it would significantly affect the result of litigation for a federal court to disregard a state law that would be controlling in state court
Reasoning:
- Erie overruled judicial process of federal courts disregarding state laws where it would lead to different results in the state vs. federal court in a diversity action
- Fed ct. is acting as just another state ct.
- It cannot afford recovery for a state-given right if the state itself would not afford recovery
- Difference between "substance" and "procedure" is not the place to determine when to apply state law.
- Does state law concern the "manner and means by which a right to recover is enforced" or would it "substantially affect the result"?
- State bars the action so the fed. ct. should be the action for the same reason
Judgment: Reversed
Opinions:
Justice Rutledge dissented (omitted in text)
