Friday, May 03, 2013

Erie Railroad v. Tompkins and the New Deal Constitution


Last week Richard Epstein and I were on a panel at AEI on the New Deal Constitution, commemorating the 75th anniversary of the decisions in Erie Railroad v. Tompkins and United States v. Carolene Products.  The video is available here.  Michael Greve kicks it off with a fifteen minute introduction to the two cases; Richard's talk begins about 14:30, and my talk begins about 24:55.  I discussed both Erie and Carolene Products in my talk; in this blog post, I will say a few words about Erie.

Erie is often associated with the New Deal, because it resulted in a kind of federal judicial restraint.  Henceforth, federal courts had to defer to state common law decisions in diversity cases. Nevertheless, in my talk, I pointed out that Erie's connection to New Deal ideas was quite contingent.  If Erie had been decided in 1948, after Darby and Wickard, rather than in 1938, the course of history might have looked very different.  It might not have seemed all that important to overrule Swift v. Tyson, and Erie might have come out the other way.

Justice Brandeis objected to federal common law in part because federal judges could make regulatory decisions through federal common law that Congress itself could not make through its enumerated powers.  But that would no longer have been true after Darby and Wickard. Between 1942 and 1995, it was generally assumed that Congress's regulatory powers were plenary.  And even after 1995, it is still generally thought that Congress has wide-ranging powers to regulate economic activity, which might encompass large swaths of tort, contract, and property law.

Another motivation for the decision in Erie was that New Deal liberals (and some of the Justices) did not like the conservative and anti-labor features of federal common law in 1938. But the Wagner Act and a host of later federal statutes and regulations would have eventually preempted many of these federal common law decisions.

Perhaps equally important, federal statutes and regulations also preempted many of the state common law rules that Erie assumed would control in diversity cases-- including the common law rules at issue in Erie itself, which concerned railroad safety. So the long term result of the New Deal was that many of the issues that Erie assumed would be handled by state common law were ultimately controlled by federal courts construing federal statutes and regulations.  (See Sam Issacharoff's recent paper on SSRN on this point.)

Not only was Erie not particularly necessary to the New Deal Revolution, but the case it overruled, Swift v. Tyson, could fairly easily have been adapted to the regulatory purposes of the New Deal.  If the Court had retained the rule of Swift v. Tyson, federal common law would not have stayed conservative for long. It would probably have changed with new judicial appointments. The federal courts and the Supreme Court, staffed by New Deal liberals, would have gradually created a federal common law of tort and contract that would have harmonized with New Deal values.  For example, liberal federal judges like Black, Douglas, Brennan, and Marshall would probably have created a liberal version of federal common law in areas like products liability, just as liberal judges on the state supreme courts did.

In this alternative scenario, conservatives in Congress might have responded to liberal federal common law decisions with federal tort reform statutes and conservative judicial appointments designed to limit or overturn these decisions. Both the liberal innovations and the conservative responses would have have further nationalized tort law. Because of Erie, however, tort reform occurred state by state and conservatives on the federal courts were mostly limited to procedural reforms like limiting federal class actions.  Whether you think this is a good thing or a bad thing, the point is that deciding Erie in 1938 had path-dependent effects that shaped how modern tort law developed.  Today tort law is taught in first-year courses as a state common law subject. But without Erie, it might increasingly have been viewed as a course about federal law and more closely integrated with federal statutory and administrative regulation.

Finally, it's worth noting that the debate over federal common law in Erie presents a very different set of problems than we face in debates over federal common law today-- for example, in debates over whether customary international law is federal common law.  The federal common law of Swift v. Tyson was non-exclusive.  Under the rule of Swift v. Tyson, both the federal courts and the state courts could have their own common law rules of tort and contract.  But the federal common law that people fight about today normally displaces state law to the contrary.