William and Mary Law School

An Excerpt from Horizontal Erie

An Excerpt from Professor Green’s article, “Horizontal Erie and the Presumption of Forum Law,” forthcoming from University of Michigan Law Review (2011), is reprinted below.

***
According to Erie Railroad v. Tompkins and its progeny, a federal court interpreting state law must decide as the state’s supreme court would. In this Article, I argue that a state court interpreting the law of a sister state is subject to the same obligation. It must decide as the sister state’s supreme court would.

Horizontal Erie is such a plausible idea, one might think it is already established law. But the Supreme Court has in fact given state courts significant freedom to misinterpret sister state law. And state courts have taken advantage of this freedom, by routinely presuming that the law of sister states is the same as their own – often in the face of substantial evidence that the sister state’s supreme court would decide differently. This presumption of similarity to forum law is particularly significant in nationwide class actions. A class will be certified, despite the fact that many states’ laws apply to the plaintiffs’ actions, on the ground that the defendant has failed to provide enough evidence to overcome the presumption that sister states’ laws are the same as the forum’s. I argue that this vestige of Swift v. Tyson needs to end.

Applying horizontal Erie to state courts is also essential to preserving federal courts’ obligations under vertical Erie. If New York state courts presume that unsettled Pennsylvania law is the same as their own, while federal courts in New York do their best to decide as the Pennsylvania Supreme Court would, the result will be the forum shopping and inequitable administration of the laws forbidden under Erie and its progeny. As a result, federal courts have often held that they too must employ the presumption of similarity to forum state law, despite its conflict with their obligations under vertical Erie. Applying horizontal Erie to state courts solves this puzzle.

We all know the story. At the time of Swift v. Tyson, federal courts thought of the common law as a “brooding omnipresence,” about which they could make their own judgments.  All that ended with Erie Railroad v. Tompkins. The common law, Justice Brandeis argued, is always “the law of [a] State existing by the authority of that State.” A federal court could not come to its own conclusions about the common law in Pennsylvania. It had to defer to the Pennsylvania Supreme Court. Another story, which is remembered a good deal less, is that state courts had their own horizontal version of Swift v. Tyson. If a state court in New York had entertained the facts in Erie, it too might have come to its own judgment about the common law in Pennsylvania. Even less recognized is that horizontal Swift never had its Erie. To a large extent, state courts still ignore sister state courts when interpreting sister state law. I will argue that it is time for this legacy of Swift v. Tyson to end. Although horizontal Swift takes a number of forms, my focus in this Article will be on the presumption, commonly used by state courts, that unsettled sister state law is the same as their own.

The obligations of a state court when interpreting sister state law go to the heart of what it means to have fifty states cohabiting a federal union. The vertical analogue – namely a federal court’s obligations when interpreting state law – has been given plenty of judicial and academic scrutiny. But aside from one unfortunate pronouncement by the Supreme Court, made without argument, and a fifty-year-old student note, discussion of the horizontal question has been largely absent. I begin with an account of the vertical Erie doctrine. The basis of vertical Erie is the recognition that a federal court does not have lawmaking power simply because it has jurisdiction over a case. The transaction being litigated can be subject to the exclusive lawmaking power of a state. If it is, the federal court has an affirmative duty to respect state lawmaking power by doing its best to discern the content of state law. For example, if state law is unsettled – in the sense that there are no state court decisions on point – it remains obligated to predict, on the basis of all the available evidence, what the state’s supreme court would do. It cannot presume that unsettled state law is the same as federal law. I then argue that state courts are bound by a horizontal Erie doctrine. Like a federal court, a state court does not have lawmaking power simply because it has jurisdiction over a case. The transaction being litigated can be subject to the exclusive lawmaking power of a sister state. If it is, the forum has the same interpretive obligations that a federal court has under vertical Erie. It has an affirmative duty to respect the sister state’s lawmaking power by doing its best to discern the content of the sister state’s law. It may not presume that unsettled sister state law is the same as its own. I argue that the Supreme Court has failed to attribute horizontal Erie obligations to state courts because it has confused these obligations with the circumstances under which it should review whether they have been abided by.

Next, I explore how state courts violate their horizontal Erie obligations by employing a presumption of similarity to forum law. The presumption can be particularly important in nationwide class actions. A class will be certified, even though the plaintiffs have causes of actions under many sister states’ laws, on the grounds that the defendant has not provided sufficient evidence to overcome the presumption that these laws are the same as the forum’s. I then discuss the effect of state courts’ violations of horizontal Erie on federal courts. Consider a federal court in New York deciding an unsettled issue of Pennsylvania law. If New York state courts would presume that Pennsylvania law is the same as their own, the federal court, it seems, must employ the same presumption or the result will be the forum shopping and inequitable administration of the laws forbidden under Erie and its progeny. Rather than deciding the issue of Pennsylvania law as the Pennsylvania Supreme Court would, the federal court must decide the issue as the New York Court of Appeals would.

To the extent that the transaction being litigated is subject to the exclusive lawmaking power of Pennsylvania, this puzzle is easily solved. It adds nothing to tell a federal court in New York to interpret unsettled Pennsylvania law as the New York Court of Appeals would, because the New York Court of Appeals itself is obligated under horizontal Erie to decide as the Pennsylvania Supreme Court would. The situation is more uncertain, however, when both New York and Pennsylvania have lawmaking power. If New York state courts could have applied New York law, but choose to apply Pennsylvania law instead, are they free to misinterpret Pennsylvania law, on the ground that any misinterpretation is a permissible exercise of domestic lawmaking power? I end the Article by arguing that a state court with lawmaking power, having chosen apply sister state law to the facts, is bound to interpret this law with fidelity. As a result, horizontal Erie obligations apply widely – to most cases in which state courts interpret sister state law. In addition, federal courts’ vertical Erie obligations are preserved: A federal court in New York must interpret Pennsylvania law as the Pennsylvania Supreme Court would, whether or not New York has lawmaking power.