The Erie doctrine is a fundamental legal doctrine in civil procedure.  It mandates that a federal court must apply state substantive law in diversity jurisdiction cases.  The reign of Swift was terminated by the Supreme Court’s decision in Erie R.R. v. Tompkins, 304 U.S. 64 (1938).   Swift v. Tyson, allowed federal judges sitting in a state to ignore the common law local decisions of state courts in the same state, in cases based on diversity jurisdiction.  The decision in Swift resulted in inconsistent judicial rulings in the same state on the same legal issue depending on whether a plaintiff brought a case in state or federal court.

In Erie, the plaintiff sought to recover for injuries he sustained when struck by an object protruding from defendant’s passing train.  Plaintiff was on a path adjacent to the tracks at the time of the accident.  The defendant railroad argued that the common law of Pennsylvania regarded the plaintiff as a trespasser under the circumstances.  The defendant further argued that the duty imposed upon the defendant railroad is only the duty to refrain from acts of wanton negligence.  Plaintiff countered that the federal diversity court was free under Swift to disregard Pennsylvania common law and to regard plaintiff as an invitee to whom defendant owed a duty of ordinary care under federal general common law.

Prior to Erie, federal courts applied state statutory law, but did not feel bound to apply state common law rules in areas of general law, such as torts and contracts.  Instead, federal courts created their own common law in these areas.  This was not viewed as displacing state authority.  Thus, federal courts were as competent as state courts to ascertain the true common law.
The United States Supreme Court ruled in favor of the defendant and, in so doing, overruled Swift’s by concluding that there is no federal general common law.  Erie established that in federal diversity cases, matters characterized as state law would govern substantive, and federal law would govern those characterized as procedural.  This became known as the substance versus procedure test.

Modern Erie doctrine generally invokes the following tests depending on the circumstances of individual cases.

• The substance-versus-procedure test serves as a first-stage screening device in Erie analysis.  An issue that clearly addresses legal rights is substantive and is to be resolved according to state law; issues that clearly pertain to the judicial process alone are procedural and invoke federal law.
• Where the issue derives from both substantive and procedural policies such as a statute of limitations, the outcome-determination test that is the next level of analysis of the Erie doctrine is applied.  In such cases, state law controls where it serves substantive interests at least in part.
• Erie doctrine does not apply if a federal rule that addresses the issue at hand exists.   In such cases, the federal procedural rule controls.
• When the issue is not sufficiently resolved by the substance-versus-procedure and modified outcome-determination tests, the policies underlying both the federal law and state law are examined.  The policy of greater importance is given more weight.