Law Applied in Federal Court

Question 1

In a federal diversity case, if there is a federal law on point that directly conflicts with state law, which law applies? Why?

Answer 1

Federal law, because of the Supremacy Clause

Question 2

In a federal diversity case, if there is no federal law on point, which law applies?

Answer 2

If the issue is procedural, federal law.

If the issue is substantive, state law.

Question 3

What are the 5 issues which are always considered substantive in a federal diversity case?

Answer 3

(1) conflict (or choice) of law rules
(2) elements of a claim or defense
(3) statutes of limitations
(4) rules for tolling of statutes of limitations
(5) the standard for granting a new trial because the jury’s damages award was excessive or inadequate

Question 4

In a federal diversity case, if there is no federal law on point and the issue is not one of the 5 issues that are always substantive, how does a federal judge determine whether an issue is “substantive”? (3 factors)

Answer 4

(1) Outcome determinative: if applying or ignoring the state rule would affect the outcome, it is substantive, and state law applies
(2) Balance of interests: whether federal or state system has a stronger interest in having its rule applied
(3) Avoid forum shopping: whether, if federal court ignores state law, it would cause more parties to file in federal court (if yes, apply state law)