How Federal Common Law was Derailed by Justice Brandeis in Erie v. Thompkins

Joanne Tetlow, J.D., Ph.D.  December 30, 2006
One dark night while walking along a railroad track, Harry J. Tompkins was struck by a projectile from a passing train. Tompkins, who resided in Pennsylvania brought an action for negligence in the federal court for southern New York, the state of incorporation for the Erie Railroad. There were different standards of care for Tompkin’s action in Pennsylvania and New York.
 If the case was tried in Pennsylvania state court or federal court, Pennsylvania common law would be applied classifying Tompkins as a “trespasser? making the Erie liable only if its negligence was wanton or willful. If the case was tried in New York federal court, federal common law would be applied making the Erie liable for any “negligent? injury.
 Pennsylvania, located in the Third circuit, deferred to state common law while New York, located in the Second Circuit, permitted wider use of federal common law; consequently, Tompkins chose to file suit in the federal court of New York. On appeal, the Circuit Court of Appeals in New York upheld the lower federal court’s jury award of $30,000 stating that, “It was unnecessary to consider whether the law of Pennsylvania was as contended, because the question was one not of local, but of general law and that ‘upon questions of general law the federal courts are free, in absence of a local statute, to exercise their independent judgment as to what the law is.’?
By applying the Swift doctrine, the Circuit Court could ignore the Pennsylvania case cited by the Erie which classified Tompkins as a trespasser. The Erie argued that this Pennsylvania case applied pursuant to § 34 of the Judiciary Act of 1789. The United States Supreme Court granted certiorari “because of the importance of the question whether the federal court was free to disregard the alleged rule of the Pennsylvania common law.?
The constitutionality of Swift v. Tyson was not an issue in the case. The Erie had argued that the lower federal court misinterpreted § 34 of the Judiciary Act of 1789 by not applying Pennsylvania law. Neither party to the case challenged the constitutionality of Swift; yet, Brandeis ruled Swift unconstitutional when it was not a legal issue before the Supreme Court.
 I submit that what animated and motivated Brandeis to overturn the Swift doctrine of federal general common law was his political Progressivism. Thus, Brandeis’s decision in Erie to overturn the Swift doctrine of federal common law was not an act of “independent” judicial interpretation, but a judgment based on his political Progressivism. To understand Erie is to understand Brandeis’s political Progressivism.
Justice Louis Dembitz Brandeis (1856-1941), appointed in 1916 by President Woodrow Wilson (1856-1924), served as the first Jewish justice on the Supreme Court from 1916-1939, the years when Progressivism was challenging the conservative Republicanism of yesterdays gone by. Erie v. Tompkins, 304 U.S. 64 (1938) stands for the principle that there is no federal “general? common law. Overturning the longstanding principle of federal general common law articulated in Swift v. Tyson, 41 U.S. 1 (1842), Erie represented a shift in the balance of power between the federal and state governments and between the federal judiciary and Congress. Erie was Brandeis’s opinion and Brandeis’s judicial philosophy. As Edward A. Purcell, Jr., in his book, Brandeis and the Progressive Constitution: Erie, the Judicial Power, and the Politics of the Federal Courts in Twentieth-Century America (2000), referring to Brandeis states, “Erie was, perhaps to an unusual degree, a decision of the Supreme Court that embodied the well-considered and fundamental constitutional theory of only a single justice.” In Erie, Brandeis unequivocally states that, “There is no federal general common law.?
Because of the nationalization of American industry, capital, and labor during the Progressive Era, federal common law was a major issue swirling around the judicial and legislative branches. The Progressive values that Brandeis cherished had been and were being undermined by an anti-Progressive national judiciary who was declaring many congressional regulatory laws unconstitutional. This situation was exacerbated by big business’s removal of cases to federal courts under the diversity jurisdiction granted by the Judiciary Act of 1789. Federal common law had been favorable to corporations.
 Brandeis disdained corporate power and its ability to manipulate and subvert the common man. There had been failed attempts by Congress to restrict diversity jurisdiction. Brandeis supported all of these bills; he wanted diversity jurisdiction to be abolished. So much so that when Erie came along in 1938, Brandeis was ready to make his decisive move of overturning 96 years of court precedent, something that hitherto had never been done.
Congress had failed to resolve the problem of federal general common law. Now, it was Brandeis’s opportunity to stop what he perceived as a central evil, the “curse of bigness.? And, even though the Erie railroad corporation lost the case, the grounds on which it did so was what Brandeis wanted to correct—federal general common law.
To obtain remainder of essay, please go to my website: http://www.politikon-zoon.com
Other topics by Dr. Tetlow
The Consoling Power of St. Augustine
The Statesman vs. The Orator: Plato on Political Debate
Elections 2006 – Consider the Unadjusted “Man”
Machiavelli’s Political Realism: Power and Its Immoral Uses
The Horror of Frankenstein: Man Without Limits
Wilson’s legacy: Political Progressivism and Pragmatism
Plato’s Philosopher-King: A Guide to the 2006 Elections

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STORY, HOLMES, BRANDEIS AND THE QUESTION OF A GENERAL FEDERAL CIVIL COMMON LAW

By William R. Adkins

     Two Associate Justices of the United States’ Supreme Court were central figures in an issue influencing the development and growth of business across the United States for ninety-six years. Joseph Story [b. 1779 d. 1845; Supreme Court Tenure=1811-1845] and Louis Brandeis [b. 1856 d. 1941; Supreme Court Tenure =1916-1939] were prominent as legal scholars and as members of the United States Supreme Court during their lifetimes; each left a legacy of that scholarship and had an impact on American law few have rivaled. The question of the existence of a general federal civil common law joins the two men in legal history. Their respective decisions, Swift v. Tyson [16 Peters 1 (1842)] by Story and Brandeis’s Erie Railroad Company v. Tompkins [64 U.S. 304 (1938)], represent a historic sequence, culminating with the latter case, in which the Supreme Court directly reversed for the only time in history an entire earlier decision [Swift] of that body by declaring that finding unconstitutional.(1)

     Nearly two centuries earlier, in 1774, John Adams, patriot and future President of the United States, had written: “How then do we New Englanders derive our laws? I say not from Parliament, not from the common law; but from the law of nature and the compact made with the king in our charter. “(2) Brandeis believed that “To study law … is necessary to understanding our own and British history.”(3) Modern legal scholar Roscoe Pound thought that English North American colonists brought the mother country’s common law principles, as espoused by Sir Edward Coke and other prominent barristers and legal scholars, to America. Seventeenth- and eighteenth-century political events in England, including the Civil War of the 1640s, the Restoration, the Glorious Revolution, and the Hanoverian ascension, were influential but nonetheless substantially isolated from developments with England’s North American possessions. The latter enjoyed considerable autonomy as they built their institutions, legal and otherwise, on the models they knew and preferred.(4)

     Joseph Story was the product of a prominent family in England’s most rebellious New England province, Massachusetts. Story’s father was a member of the Sons of Liberty, a participant in the Boston Tea Party, and a veteran of the American Continental Army.(5) When Story, at age thirty-two, became the youngest Associate Justice of the United States Supreme Court in 1811, the new American states had already chosen to receive and adopt, to one degree or another, the common law of the parent country. Joseph Story would spend a large part of his life and labor in developing a system of American general federal civil common law from it.(6)

     The economic system of an independent United States necessitated the establishment of financial institutions, the passage of trade legislation, and the regulation of currency. Resulting conditions enabled some to take advantage of the system and shape it to their own interests.(7) In nineteenth-century America, law had gradually undergone transformation from a force of stability and ethics, symbolic of order and strength, to a tool by which activist business, legal, and political groups could pursue their own self interests. Accordingly, the entrepreneurial groups could corner various economic resources and do so with the force of law.(8) By the late 1830s and early 1840s, however, America was suffering from the effects of a financial panic. The Supreme Court was pressed by business and government leaders to assert itself and clarify Section 34 of the Judiciary Act of 1789, which, to some, had become an obstacle to reversing the ensuing crisis.(9) Section 34 of that act read:

The laws of the several states, except where the Constitution, treaties, or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States in cases where they apply.(10)

     Into this situation appeared a controversial case ultimately decided by Justice Story. Swift v. Tyson [hereafter cited Swift] was the case of a bill of exchange allegedly obtained by fraud and accepted by the plaintiff, Joseph Swift, a Maine bank cashier, as payment of a prior debt by a third party.(11) Two land speculators, Nathaniel Norton and Janus Keith, obtained the bill of exchange from one George Tyson of New York. Tyson was but one of many partners Norton and Keith had sought as financial backers in a land purchase scheme in Maine. After suffering business reverses, Norton and Keith fled New York to escape the consequences of fraud charges. Once they discovered the scheme, their partners let it be known to Wall Street they would not cover the bills of exchange. The partners minimized their losses, but George Tyson was placed in the position of having to cover his bill of exchange when it was endorsed by Norton to Joseph Swift, making Tyson a debtor to Swift.(12)

     It once was a common saying in the nineteenth-century west that “a draft on Chicago drawn in Omaha and put through the usual course of collection was subject to three different laws,” those of the different states.(13) Congress had always required the federal courts to apply state law in diversity cases, those cases involving more than one state.(14) Swift provided Story and other Supreme Court justices an opportunity to interpret Section 34 and construct a new doctrine, one that might aid the young American economy.(15)

     In his written opinion, Story made a distinction between “state laws strictly local” and “general commercial law.”(16) The first concerned real estate, immovable property, and was subject to local law. Federal courts were bound by state law in questions involving diversity. General commercial law was not subject to local statutes because it involved mobile property, such as valuable paper. Story conceived of commercial law as law which the judge might discover utilizing common law principles.(17) Applying this reasoning, Story ruled that federal courts could adhere to their own concept of law in diversity litigation.(18) In Swift and other cases between 1842 and 1856, the Court formed a “uniform and consistent general commercial jurisprudence” utilizing existing mercantile principles and customs.(19) Under common law principles, the federal court was free to meet the expectations of those who operated under those mercantile customs and obligated to protect same from local custom or judiciary officials who might interfere in those “reasonable anticipations. “(20) Story believed his approach would result in uniformity because state systems would allow federal judges to construct a predictable body of law.(21)

     Instead of a uniform commercial law approach under the Swift doctrine, two separate legal systems arose to deal with local affairs. One was state and the other, federal.(22) Story’s ruling advanced central federal authority to the detriment of states’ rights and separated the states from each other and, as a group, from the federal government as components and jurisdictions.(23) An attorney preparing for a case could not be certain in which forum, state or federal, it might be tried; nor could he, because of this, predict which issue would be questioned or which rules might be invoked. Uniformity was not the result of Swift.(24) Instead, injustice could occur, depending on which level of government possessed jurisdiction.(25)

     After the War between the States, the Court included municipal bonds and torts in the Swift doctrine. This had the effect of further blurring the line between general and local law and caused federal judges to intrude into areas previously under state jurisdiction. The confusing result inspired corporations wanting to avoid restricting state laws to move their disputes to federal courts.(26) Under Swift, federal courts utilized a legal fiction in any dispute involving diversity jurisdiction to recognize a corporation as a citizen of the state in which it was incorporated. This allowed businesses to seek out judges who might view their case kindly and grant a favorable result. Additionally, corporations could move their litigation to remote and inconvenient courts to make it difficult for opponents to attend the proceedings.(27)

     Swift was the most used antebellum Supreme Court decision in the decades after the War.(28) Rural to urban migration, population growth, and the extension of the railroads had profound effects on the economy. Prices fell, and producers became creative in methods for influencing pricing and production. Utilizing trusts, holding companies, and other tools, producers pursued their objectives. They eliminated the small middlemen as they built their own distribution networks. This resulted in fewer but larger businesses. Holding companies were attracted to states with laws permitting their formation, generally prohibited under the states’ common law. This arrangement allowed a firm to possess stock in businesses in other states and gave direct control of those assets to a board of directors. This also allowed greater utilization of diversity jurisdiction.(29)

     By the early years of the twentieth-century, twenty-eight categories of business disputes existed in which state and federal courts applied different rules.(30) Federal and state legislators moved to regulate business and transportation as interstate businesses were caught in confusing and often contradictory systems.(31) The Swift doctrine came under attack by states’ righters as a violation of the Tenth Amendment, which reserved certain powers to the states, and by lawyers as a source of confusion.(32)

     In a railroad tort case in 1893, Associate Justice Stephen Field argued that Swift was a method by which judges made law unconstitutionally, even when considering “… the great names [Story] which may be cited in favor of the doctrine.”(33) Associate Justice Oliver Wendell Holmes, Jr., believed the Court’s function was to protect free trade and communication between and among states, not the protection of property or business within any state.(34) In 1927, Holmes dissented in Black & White Taxicab & Transfer Company v. Brown & Yellow Taxicab & Transfer Company [276 U.S. 518, 532], a case in which one of the companies had incorporated in a different state to take advantage of diversity jurisdiction. Holmes criticized the manipulation of the systems to move the case to federal courts and wrote, “… what I think the fallacy is … the often repeated proposition of this and the lower courts … that the parties are entitled to independent judgment on matters of general law.” Associate Justice Louis Brandeis joined Holmes’ dissent.(35)

     In a letter in 1929 Holmes wrote,

I think our court has fallen into the error… is that … the common law is not a brooding omnipresence in the sky… The common law in a state is the common law of that state deriving all its authority from [that] state ….

     Holmes believed the court erred in supporting federal circuit courts’ use of independent judgment to discover common law in states so they could ignore the state supreme courts. This, he believed, allowed the judges power to make law rather than function as “… simply directors of a force that comes from the source that gives them their authority. “(36)

     In Kuhn v. Fairmont Coal Company [215 U.S. 349,370 (1910)], a case in which the Court reversed a West Virginia state supreme court ruling, Holmes dissented. He asserted that federal judiciary did not possess the power to ignore state law under any circumstances.

It is said that we must exercise our independent judgment – but as to what? Surely as to the laws of the States.. When we know what the source of the law has said that it shall be, our authority is at an end. The law of a State does not become something outside of the State court and independent of it by being called the common law. Whatever it is called it is the law as declared by the state judges and nothing else.(37)

     Holmes once said of Louis Brandeis,

…I should say that he always desires to know all that can be known about a case where as I am afraid that I wish to know as little as I can safely go on. He loves facts and I hate them except as the necessary peg to hang generalizations on.(38)

     Holmes and Brandeis maintained that Story’s decision in Swift utilized an incorrect misinterpretation of Section 34.(39)

     In 1938 Brandeis was presented with an opportunity to destroy what Story had fashioned in 1842, producing the ninety-six year-old legacy of state-federal relations.(40) While walking along the Erie Railroad’s tracks in Pennsylvania, Harry Tompkins was struck by the door of a passing freight train. A Federal District Court judge in New York had instructed a jury in the accepted fashion under the Swift doctrine. The result was a $30,000 award for Tompkins. The railroad appealed, maintaining Pennsylvania law perceived Tompkins as a trespasser and did not deem him eligible to win damages in such a case. The Court prepared to “… blow a doctrine that never should have been into kingdom come. “(41) Chief Justice Charles Evans Hughes wrote, “If we wish to overrule Swift v. Tyson here is our opportunity.”(42) Swift had become the target of legislation and had been under attack for decades. Applied for almost a century, the doctrine had become notorious.(43)

     Brandeis was assigned the case by Hughes.(44) Brandeis chose to question Story’s interpretation of Section 34, accepting the authority of Charles Warren, a legal scholar who had found the original draft of Section 34 authored by Oliver Ellsworth. In it, the word “law” had replaced the words “statute law.”(45) Warren reasoned from this discovery that Ellsworth’s original intent was for federal courts to “follow state court decisions as well as state statutes… “(46) Brandeis did not base his decision on Warren’s interpretations, but he utilized, as was his practice, law review articles to substantiate his views. In Erie Railroad Company v. Tompkins [hereafter cited Erie], Brandeis cited twenty-eight such articles, though he did not overtly refer to them in his decision. This was in deference to fellow Associate Justice, the irascible James McReynolds, who did not, as Brandeis put it, ” favor Law Review citations.”(47)

     Brandeis wrote his opinion for a five judge majority and cited the repeated criticisms of the Swift doctrine and its “prerogative power.”(48) Brandeis held that the federal judiciary had acted in an unconstitutional manner for nearly a century by misinterpreting Section 34 to allow independent judgment in cases involving diversity jurisdiction.(49) Brandeis concluded, utilizing Warren’s work and previous dissents by Field and Holmes, as well as the law review articles critical of Story’s decision, that Story’s interpretation of Section 34 allowed for the usurpation of powers reserved to the states, led to “forum shopping,” and was otherwise unsupported in endowing the federal judiciary independent judgment.(50)

     Under advice from Associate Justice Harlan Fiske Stone, Brandeis emphasized that Swift was unconstitutional. Stone believed the only possible rationale for repudiating Swift was unconstitutional action by the Court itself.(51) Brandeis’s opinion stated,

There is no federal general common law. Congress has no power to declare substantive rules of common law applicable in a state whether they be local in their nature or “general,” be they commercial law or a part of the law of torts. And no clause in the Constitution purports to confer such a power upon the federal courts.(52)

Brandeis’s opinion did not allow Congress the authority to define law applied in diversity cases and federal courts could no longer use independent judgment to discover law.(53) The ruling necessarily excepted situations involving federal and constitutional questions.(54)

     Erie was not widely noted in the press. Journalist Arthur Krock wrote, “If the Supreme court, like so many other arms of the government, had a publicity agent eight days would not have passed before the importance of its decision in the Tompkins case became known … .”(55) In this manner, Erie eliminated nearly a century of labor in the construction of general law using independent judgment.(56) The decision restored states’ authority taken by Swift. In citing Story’s interpretive error as applied to Section 34 the court made a correction that reversed, surprisingly, a ninety-six year old precedent that had not been questioned by any attorney.(57)

     Associate Justice William 0. Douglas noted years later that,

… the Court never had hesitated to overrule a constitutional adjudication. … The question was not whether the case was too old to overrule; the overriding consideration was whether the old interpretation suited modern need, modern problems.(58)

Joseph Story was a professional man of his time, and he applied law in the context of his period. Nearly a century later, in 1938, Louis Brandeis worked his way through a similar process, and Joseph Story’s decision of 1842 failed the test of time.

ENDNOTES

1. Alfred H. Kelly, et al., The American Constitution: Its Origin and Development, 7th ed. (New York: W.W. Norton, 1991), 506.

2. Roscoe Pound, “The Place of Judge Story in the Making of American Law,” The American Law Review 48 (1912): 691.

3. Richard A. Cosgrove, Our Lady the Common Law: An Anglo-American Legal Community. 1870-1930 (New York: New York University Press, 1987), 15.

4. Roscoe Pound, The Spirit of the Common Law (Francestown, New Hampshire: Marshall Jones Company Publishers, 1921; reprinted 1931), 42.

5. Gerald T. Dunne, Justice Joseph Story and the Rise of the Supreme Court (New York: Simon and Schuster, 1970), 32.

6. Pound, “Place of Judge Story,” 682.

7. William E. Nelson, Americanization of the Common Law: The Impact of Legal Change on Massachusetts Society. 1760-1830 (Cambridge, Massachusetts: Harvard University Press, 1975), 145.

8. Ibid., 173.

9. Tony A. Freyer, Forums of Order: The Federal Courts and Business in America, Vol. 1: Industrial Development and Social Fabric: An International Series of Historical Monographs, ed. Glenn Porter (Greenwich, Connecticut: JAI Press, Inc., 1979), 48.

10. Dunne, Justice Joseph Story, 405.

11. Karl N. Llewellyn, The Common Law Tradition: Deciding Appeals (Boston: Little, Brown and Company, 1960), 414.

12. Freyer, Forums of Order, 54, 57, 58.

13. Pound, Spirit of the Common Law, 55.

14. Wallace Mendelson, Justices Black and Frankfurter: Conflict in the Court (Chicago: The University of Chicago Press, 1961), 81.

15. Freyer, Forums of Order, 74.

16. R. Kent Newmyer, Supreme Court Justice Joseph Story: Statesman of the Old Republic (Chapel Hill: The University of North Carolina, 1985), 334.

17. Ibid., 327, 334.

18. James Willard Hurst, The Growth of American Law: The Law Makers (Boston: Little, Brown and Company, 1965), 189.

19. Freyer, Forums of Order, 90.

20. George Lee Haskins and Herbert A. Johnson, Foundations of Power: John Marshall. 1801-1815. Vol. 2: History of the Supreme Court of the United States, The Oliver Wendell Holmes Devise, ed. Paul A. Freund (New York: Macmillan Publishing Company, 1981), 566.

21. Alpheus Thomas Mason, Harlan Fiske Stone: Pillar of the Law (New York: The Viking Press, 1956), 477.

22. Mendelson, Justices Black and Frankfurter, 82.

23. William R. Leslie, “The Influence of Joseph Story’s Theory of the Conflict of Laws on Constitutional Nationalism,” Mississippi Valley Historical Review 35 (1948): 184.

24. Henry J. Friendly, “In Praise of Erie – and of the New Federal Common Law,” New York University Law Review 39 (1964): 405.

25. Mason, Harlan Fiske Stone, 477.

26. Newmyer, Justice Joseph Story, 335.

27. Hurst, Growth of American Law, 189.

28. Newmyer, Justice Joseph Story, 383.

29. Freyer, Forums of Order, 99-101.

30. James McClellan, Joseph Story and the American Constitution: A Study in Political and Legal Thought (Norman: University of Oklahoma Press, 1971), 183, 184.

31. Freyer, Forums of Order, 102.

32. McClellan, Joseph Story, 184.

33. Newmyer, Justice Joseph Story, 335.

34. Hurst, Growth of American Law, 191.

35. Alfred Lief, ed., The Dissenting Opinions of Mr. Justice Holmes (New York: The Vanguard Press, 1929), 135.

36. Mark DeWolfe Howe, ed., Holmes-Laski Letters: The Correspondence of Mr. Justice Holmes and Harold J. Laski. 1916-1935 (Cambridge, Massachusetts: Harvard University Press, 1953), 822.

37. Ibid., 100-102.

38. Cosgrove, Our Lady the Common Law, 108.

39. McClellan, Joseph Story, 185.

40. Mason, Harlan Fiske Stone, 478.

41. Ibid.

42. Ibid.

43. Friendly, “In Praise of Erie ” 390.

44. Mason, Harlan Fiske Stone, 478.

45. McClellan, Joseph Story, 185.

46. Ibid.

47. Philippa Strum, Louis D. Brandeis: Justice for the People (Cambridge, Massachusetts: Harvard University Press, 1984; reprint, New York: Schocken Books Inc., 1989), 363-364.

48. Freyer, Forums of Order, 153.

49. Randall Bridwell and Ralph U. Whitten, The Constitution and the Common Law: The Decline of the Doctrines of Separation of Powers and Federalism (Lexington, Massachusetts: Lexington Books, D.C. Heath and Company, 1977), 1.

50. Freyer, Forums of Order, 153.

51. Mason, Harlan Fiske Stone, 479-480.

52. Albert B. Saye, ed., American Constitutional Law: Cases and Text, 2d ed. (St. Paul, Minnesota: West Publishing Company, 1979), 52.

53. Mason, Harlan Fiske Stone, 480.

54. Freyer, Forums of Order, 152.

55. Mason, Harlan Fiske Stone, 477.

56. Charles T. McCormick, et al., eds., Cases and Materials on Federal Courts, 5th ed., University Casebook Series (Mineola, New York: The Foundation Press, Inc., 1970), xiii.

57. John R. Schmidhauser, The Supreme Court as Final Arbiter in Federal-State Relations 1789-1957 (Chapel Hill: The University of North Carolina Press, 1958), 180.

58. William O. Douglas, The Court Years. 1939-1975: The Autobiography of William O. Douglas (New York: Random House, 1980), 121.

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