Swift v. Tyson

Massively, massively oversimplified, here is the history of doctrine on the Erie question.

Before 1938:  Federal courts sitting in diversity used the rules of procedure of the state in which they sat (because Congress told them to do so in a statute called the Conformity Act, and because there were no federal rules of civil procedure).  Under the doctrine of Swift v. Tyson, the next case we read, federal diversity courts used the "general law" on matters of substance; as we will discuss in class, modern thinkers now believe that the "general law" was actually federal common law, meaning law that federal judges made up.  This "general" law/federal common law often conflicted with the substantive law of the state in which they sat.

After 1938:  In matters of substance, the 1938 decision of Erie RR v. Tompkins overruled Swift v. Tyson, and held that federal diversity courts should use state law in matters of substance.  In that same year, pursuant to a congressional statute called the Rules Enabling Act (which we will study), the federal court system adopted the Federal Rules of Civil Procedure.  So, federal courts now use federal law for matters of procedure.

We will begin with a focus on matters of substance.  We will start with the ruling of Swift, which said that the "general law" governed most matters adjudicated in federal diversity cases.  As we will learn, part of the Swift doctrine rested on its interpretation of 28 U.S.C. § 1652, the Rules of Decision Act, which appeared to direct the federal courts to use "the laws of the several states" in diversity cases.

The facts of Swift are complicated. Oversimplified, they are as follows:  Norton and Keith were swindlers who tried to sell land they did not own to Tyson. Tyson paid with a bill of exchange, which was a promise to pay a certain amount of money at a later date. The bill of exchange was made in Maine. Norton and Keith then gave this bill to Swift to pay off a debt. Swift tried to cash in the bill by giving it to Tyson. Tyson, realizing that Norton and Keith did not own the land they tried to sell, refused to pay Swift. Swift sued in New York federal court. 

The main question at issue was whether the federal court had to apply New York state law. The question turned on the meaning of the phrase "laws of the several states" in the Rules of Decision Act.  Under New York state common law (meaning judge-made law), the original swindle relieved Tyson of the obligation to pay.  Justice Story, however, believed that the better rule was what we now call the "holder in due course" doctrine, under which Tyson had to pay Swift and then sue the swindlers himself.