Three Important Cases Between York & Byrd

Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530 (1949) 

Ragan concerned an action for damages arising out of an automobile accident that occurred on October 1, 1943 in Kansas. Following the procedure prescribed in the FRCP, the petitioner instituted the action in federal court (on the basis of diversity jurisdiction) by filing a complaint on September 4, 1945 for tort claims arising out of the accident. A summons was issued, and in-person service was made on December 28, 1945.

The respondent filed for summary judgment on the basis of Kansas’ two-year statute of limitations for such tort claims. However, the petitioner claimed that the statute of limitations had been tolled by the filing of the complaint. The respondent contended that the statute of limitations was only tolled by the service of process. 

The Court sided with the respondent, explaining: “Since th[e] cause of action is created by local law, the measure of it is to be found only in local law. It carries the same burden and is subject to the same defenses in federal court as in the state court. It accrues and comes to an end when local law so declares. Where local law qualifies or abridges it, the federal court must follow suit. Otherwise there is a different measure of the cause of action in one court than in the other, and the principle of Erie R. Co. v. Tompkins is transgressed.” (citations omitted)

Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949)

At issue in Cohen was a New Jersey statute making certain unsuccessful plaintiffs in shareholder derivative suits responsible for all expenses and attorney’s fees of the defense. Because the suit had been brought in federal court, the unsuccessful plaintiff in Cohen contested the applicability of the statute, arguing that its provisions were “mere rules of procedure rather than rules of substantive law” (in the Court’s characterization).

The Court rejected a strict substantive versus procedural test for the applicability of state rules in federal court: “Even if we were to agree that the New Jersey statute is procedural, it would not determine that it is not applicable.”

In any case, the Court found that the act in question created a new substantive liability as well as provided for the mode of enforcing it. The plaintiff had pointed to FRCP 23.1 (regarding disclosure and notice) as the sole governing rule, but after discussing the scope of the two rules, the Court found that none of the provisions of Rule 23.1 actually conflicted with the New Jersey statute, and ultimately upheld the applicability of the New Jersey statute in federal court.

Woods v. Interstate Realty Co., 337 U.S. 535 (1949) 

Woods was a diversity case brought in federal court in Mississippi regarding a broker’s commission allegedly due for the sale of real estate in the state. The district court dismissed the suit with prejudice as the contract at issue was void since the respondent was doing business in the state without the necessary, statutorily-mandated qualification.

The Supreme Court agreed, finding that “where … one is barred from recovery in the state court, he should likewise be barred in the federal court. The contrary result would create discriminations against citizens of the State in favor of those authorized the invoke the diversity jurisdiction of the federal courts.” Because the claims at issue could not be brought in state court, the doors of the federal court were likewise closed.