Erie R. Co. v. Tompkins Facts.

Tompkins (Plaintiff) was walking along a path next to railroad tracks in Pennsylvania when an object protruding from a train struck him. Plaintiff sued Erie Railroad Company (Defendant), the owner of the property, for negligence in federal court. Defendant is based in New York. Under Pennsylvania law, Plaintiff was a trespasser and Defendant only owed a duty to avoid wanton negligence. The majority rule, however, is that a railroad owes a duty of ordinary care to a traveler on a footpath. The District Court applied the general law and found for Plaintiff. The Court of Appeals affirmed. Issue. Under Section 34 of the federal Judiciary Act of 1789, should Pennsylvania law apply to Plaintiff's case? Held. Yes. [Swift v. Tyson, 41 U.S. (16 Pet.) 1, 10 L.Ed. 865 (1842)], is overruled. The doctrine irrationally favored state statutory law over state common law. Thus, Swift favored outof-state litigants over in-state litigants because the out-of-state litigant could ensure that a case would be heard in federal court if it did not like the common law applicable in state court. Federal courts are courts of limited jurisdiction and thus cannot "supervise" the decisions of the state courts unless such authority is specifically delegated to them in the constitution. Thus, there is no federal common law. State common law and statutes should be given equal force in the federal courts deciding state law. Section 34 is not unconstitutional, just the doctrine of Swift v. Tyson.

Dissent. Justice Butler: The Court considered a question that was not raised. Furthermore, the case cited as grounds for overruling Swift v. Tyson was a single dissent authored 50 years after the Tyson decision was announced. The Court does find Section 34 unconstitutional, and it did not give counsel a chance to argue the constitutional question. Finally, the constitutionality of Section 34 need not have been considered because the evidence shows that Plaintiff was guilty of contributory negligence. Therefore, the judgment should be reversed. Concurrence. Justice Reed: The rule in Swift was not unconstitutional, it was just erroneous. The Court's opinion here implies that the federal courts must follow state decisions involving substantive law, whether Congress legislates or not, because to not follow state decisions would violate the constitutional autonomy of the states. This implication is questionable, because under Article III and the necessary and proper clause, Congress can restrict federal courts' adherence to state common law. Discussion. This case articulates what is known as the "Erie doctrine": a federal court sitting in diversity applies substantive state law. Erie expanded the definition of Section 34 of the Judiciary Act of 1789 to include state court decisions. The two policies emphasized in Erie: uniformity of state court decisions and prevention of discrimination between residents and non-residents, are mentioned frequently in subsequent decisions that support and refine Erie. Only the concurring opinion of Justice Reed explicitly states that a federal court should apply state substantive law and federal procedural law.

Guaranty Trust Co. v. York Facts. Guaranty Trust Company (Defendant) was a trustee of Van Sweringen Corporation. Defendant loaned money to corporations affiliated with the Van Sweringen. Van Sweringen was having trouble meeting its financial obligations, so Defendant and other banks worked out a plan that Defendant would offer to purchase notes by paying $500 and twenty shares of Van Sweringen's stock for each $1000 note. Plaintiff received $6000 of the notes from a donor who had not accepted Defendant's offer. Plaintiff brought a diversity suit against Defendant alleging breach of fiduciary duty by fraud and misrepresentation, which was an equitable remedy. The Court of Appeals found that if the suit was brought in equity, a federal district court was not required to apply the state

statute of limitations that would govern similar suits in state courts, even though the exclusive basis of federal jurisdiction was diversity. The Supreme Court granted certiorari. Issue. Are federal courts permitted to grant equitable remedies that are consistent with state substantive law when an identical remedy would not be available in state courts? Does the federal district court have to apply the state statute of limitations to Plaintiff's cause of action under the Erie doctrine?

Held. First issue: No. Second issue: Yes. Reversed. When exercising diversity jurisdiction, federal courts have not differentiated between law and equity. Federal courts have traditionally had more respect for state rights in equity rather than law, because legal rights were declared by state courts and rights in equity were defined by legislative enactment. Congress never gave and the federal courts never claimed that the courts had the power to deny substantive rights created by State law, or to create substantive rights denied by State law. Prior to this case, federal courts were enforcing state created substantive rights only if the state laws agreed with traditional notions of equity. The outcome in the federal court case should be substantially the same as the outcome had the case been brought in state court. The statute of limitations involves the right to recover. The federal court must therefore apply the state statute of limitations when following the Erie doctrine because refusing to apply it would allow a party to bring suit that it would be barred from bringing in state court.

Discussion. This case demonstrates that federal courts sitting in both law and equity should apply state law if required by the Erie doctrine. The state statute of limitations is applied in this case because statutes of limitations are inherently "outcome determinative." If the plaintiff is completely barred from bringing the suit in state court, the federal court could not extend the right to bring suit without discriminating in favor of non-residents.

Byrd v. Blue Ridge Rural Electric Cooperative, Inc. Facts. Byrd (Plaintiff), a resident of North Carolina, sued Blue Ridge Rural Electric Cooperative, Inc. (Defendant), a South Carolina corporation, for negligence in federal court in South Carolina. Plaintiff was injured while working for a construction contractor that had a subcontract with Defendant. Defendant asserted an affirmative defense that Plaintiff was barred from suit under the South Carolina Workmen's Compensation Act because Plaintiff was a "statutory employee" and must accept statutory compensation as his exclusive remedy. The jury returned a verdict for Plaintiff. The Court of Appeals reversed and directed judgment for Defendant, holding that Plaintiff was in fact a statutory employee. Plaintiff appealed, arguing that the Court of Appeals should have remanded to give Plaintiff an opportunity to introduce further evidence. On appeal, the United States Supreme Court held in favor of Plaintiff and addressed an additional question of whether there should be a bench trial (as would be the case under South Carolina law) or a jury trial (as required in federal court by the 7th Amendment). Issue. When state law conflicts with federal law in determining whether an action should be tried by a judge or jury, which law should control where the case is to be tried in a federal court exercising diversity jurisdiction? Held. A federal court should conduct jury trials when required by the 7th Amendment. Reversed and remanded.

The policy of uniform enforcement of state-created rights and obligations cannot require compliance with a state rule that does not involve rights and obligations of its citizens and disrupts the federal system of allocating functions between judge and jury. This policy would alter the essential character and function of a federal court. Although a judge may reach a different decision than a jury in this case, state law is not applied in every situation where doing so might be outcome determination. Rather, federal interests, such as conformity with the 7th Amendment must be considered. Because this rule is procedural and the conflict interferes with federal functions, it is not considered a decision under the Rules of Decision Act.

Discussion. Although the test for determining whether a state law should be applied under Erie is whether it is "outcome determinative," the court must weigh the state's interests in applying its own law against the federal interest in applying federal law. Hanna v. Plumer Facts. Hanna (Plaintiff) and a citizen of Ohio sued Plumer (Defendant) and a citizen of Massachusetts in a federal court in Massachusetts. Defendant was executor of Osgood's estate. Osgood was also a Massachusetts resident. Plaintiff alleged that she was involved in a car accident with Osgood in South Carolina. Service of process was made by leaving copies of the summons with Defendant's wife, which complies with Federal Rule of Civil Procedure 4(d)(1). Defendant filed an answer stating that the action could not be maintained because it did not comply with Mass. General Laws Chapter 197, Sec. 9 which requires in hand delivery of the summons. The District Court granted summary judgment for Defendant after finding that the Massachusetts law was "outcome determinative." The Court of Appeals affirmed the District Court's judgment, ruling that the legislative purpose of the Massachusetts statute was to require personal notification within a year, which is a "substantive" matter. Issue. Should the District Court have applied Federal Rules of Civil Procedure 4(d)(1) instead of the state statute governing the method of process? Held. Yes. Under Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), whether the state or federal law is to be applied is not just whether the law is substantive or procedural, or whether it is outcome determinative, but whether it complies with the policies underlying the Erie doctrine. Rule 4(d)(1) is not prohibited by the Constitution. It is authorized by Article III and the Necessary and Proper Clause. The purpose of the Federal Rules is to create uniformity. The Erie doctrine and the extensions in York and Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), were not meant to block the federal rules if they are "outcome determinative" or have "integral relations." Congress created the Federal Rules to create uniformity in the federal court system. Service of process is not a substantive right intended to be enforced by the Erie decision because the method of service here only "altered the mode of enforcing state-created rights" rather than changing the actual rights.

Concurrence. Justice Harlan: The Court should focus on whether the rule applies to a situation that is normally one left to state regulation. Discussion. The majority opinion illustrates that the federal interest in creating a uniform code of procedure for the

federal court system is secondary to the state's procedural laws. In the event there is a direct conflict, the federal law must prevail so long as it complies with the Rules Enabling Act and the U.S. Constitution. Walker v. Armco Steel Corp. Facts. Walker, Plaintiff, and a resident of Oklahoma, was injured on August 22, 1975. Plaintiff filed a complaint against Armco Steel Corp., Defendant, a foreign corporation, in federal court based on diversity of citizenship on August 19, 1977. Service of process was not made on Defendant's agent until December 1, 1977. Defendant filed a motion to dismiss because the statute of limitations had run by the time Defendant was served. Oklahoma state law states that the action is commenced for purposes of the limitation when the complaint is filed if Defendant is notified within 60 days of filing the complaint. The 60 day limit had expired by the time Defendant was served so the statute had run. Plaintiff argued that Rule 3 of the Federal Rules of Civil Procedure governs the case. Rule 3 states: "[a] civil action is commenced by filing a complaint with the court." The District Court dismissed the complaint because the Oklahoma statute was "an integral part of the Oklahoma statute of limitations" and under Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), state law must be applied. The Court of Appeals affirmed. Issue. Is a state statute that determines when a cause of action commences for purposes of tolling the statute of limitations applicable in a federal court under Erie where the statute is not in direct conflict with Rule 3 of the Federal Rules of Civil Procedure? Held. Yes. Judgment of the Court of Appeals affirmed. Ragan involved the same situation and held that since the statute of limitations barred recovery in state court then the action should not be permitted to survive in federal court. The test in Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), states that if the federal rule is in "direct conflict" with the state rule, there must be a determination of whether the federal rule is within the scope of the Rules Enabling Act, and therefore within a constitutional grant of power such as the Necessary and Proper Clause. Hanna and Ragan are distinguishable from each other because in Hanna, Rule 4(d)(1) of the Federal Rules of Civil Procedure was in direct conflict with the Massachusetts law governing service of process. In Ragan, the state tolling provision was applied and not Rule 3. Rule 3 does not explicitly apply to the tolling of the state statute of limitations. Rule 3 governs the times at which limitations of federal rules begin to run, but does not establish the time at which a state statute of limitations begins to run. The Oklahoma law requiring a suit to commence by service of process is directly linked to the state's policy of having the statute of limitations. The statute, therefore, is not in direct conflict with Rule 3. Thus, the Erie doctrine applies. Under the Erie doctrine, the state law must be applied because not applying the state law would allow out-of-state plaintiffs to avoid unfavorable statutes of limitations.

Discussion. Under Hanna, a federal procedural rule must directly conflict with the state law dealing with the same issue in order for the federal rule to apply. In this situation, Rule 3 was interpreted not to address the statute of limitations, and thus did not fall into "direct conflict" with the Oklahoma state tolling provisions Stewart Organization, Inc. v. Ricoh Corp. Facts. Stewart, Plaintiff, sued Ricoh Corp., Defendant, in federal court in Alabama based on diversity of citizenship. Defendant asked the federal court to use its discretion under 28 U.S.C. 1404(a) to honor the forum selection clause and transfer the case to New York, or, alternatively, to dismiss the case for improper venue based on 28 USC

1406. The District Court denied the motion, stating that the case is governed by Alabama law and Alabama disfavors forum selection clauses. The District Court certified the ruling for interlocutory appeal and the Court of Appeals accepted jurisdiction. A panel of the Court of Appeals reversed, stating venue questions are governed by federal law, and that the clause was enforceable as a matter of federal law. The Court of Appeals reversed and remanded to transfer the case to New York. The Court of Appeals en banc affirmed the panel's decision. Plaintiff appealed. Issue. In a federal court sitting in diversity, is an issue regarding venue is controlled by federal law as opposed to state law? Held. Yes. Judgment of the Court of Appeals affirmed. Section 1404(a) is sufficiently broad to cover the issue at hand. The focus is on whether the case might have been brought in New York, while taking into consideration bargaining power and convenience in light of the forum selection clause. By focusing on Alabama law, the District Court contravened Congressional intent by considering factors that defeat the purpose of Section 1404(a). Because the two statutes conflict with each other, the federal statute controls. It is within Congress' power to enact section 1404(a) because that section can be classified as procedural and does not change the applicable law regarding venue in Alabama.

Discussion. The Alabama law articulated a clear policy against forum selection clauses. The federal statute, by contrast, required consideration of various factors such as bargaining power and convenience when evaluating the validity of the forum selection clause. The laws conflict because the Alabama law does not require consideration of these additional factors. Therefore, federal law prevails. Gasperini v. Center for Humanities, Inc. Facts. Gasperini (Plaintiff) sued Center for Humanities (Defendant) in federal court based on diversity of citizenship. The jury returned a verdict for Plaintiff of $450,000 in compensatory damages. Defendant moved for a new trial, arguing that the verdict was excessive. The District Court denied the motion. The Second Circuit vacated the judgment based on a New York law allowing the New York Appellate Division to determine that an award is excessive or inadequate if it "materially deviates from what is reasonable compensation." The Second Circuit reasoned that the standard used to determine the verdict was not sufficient, and ordered a new trial unless Plaintiff accepted a lower amount. Plaintiff appealed. Issue. Should the trial court have used the state law standard when reviewing the jury's verdict for excessiveness? Should the appellate court use the state law standard when reviewing the trial court's decision as to whether the jury's verdict was excessive?

Held. First issue: Yes. Second issue: No. Reversed and remanded in order for the District Court to determine if the jury's verdict was excessive under the "deviates materially" standard as required by state law. Under New York law, the Appellate Division can review a verdict for excessiveness under the "deviates materially" test, which requires more scrutiny then the "shocks the conscience" test employed as the federal standard. The law is both substantive and procedural: substantive in providing the "deviates materially" test and procedural in granting the review to the New York Appellate Division. The analyses under the Erie doctrine focus on whether application of the federal standard cause discrimination against non-diverse parties and whether application of the federal standard would encourage individuals to file in federal court.

In the event that the federal standard is applied, there would be substantial variations between state and federal money judgments. The situation is analogous to the issue in Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), where this Court would not permit an action to survive longer in federal court than it would have in state court. In addition, a trial judge can reverse the verdict in this situation so long as reversal is consistent with the Seventh Amendment. Appellate courts, however, cannot reverse the trial court's decision to uphold or reverse a jury's verdict unless there was an "abuse of discretion" by the District Court. This is a matter of law, not of fact. In Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), involving the first clause of the Seventh Amendment (trial by jury), the Court emphasized the importance of not disturbing the province of the jury. With that policy in mind, appellate review of the trial court's decision regarding jury verdicts under the second clause (reexamination) should be restricted to an abuse of discretion standard. To avoid disrupting New York's substantive law, the trial judge must use the "deviates materially" test. The Appellate Court can only determine whether the trial judge abused her discretion if the verdict is appealed for excessiveness.

Dissent. Justice Stevens: The Court of Appeals judgment should have been affirmed. Although the Seventh Amendment does not bar appellate review of jury verdicts, it does not "command" that federal appellate courts review a district court's application of state law damage standards for "abuse of discretion." Byrd only dealt with the first clause of the Seventh Amendment, so there is no need to apply Byrd here. Justice Scalia: At common law, review of judgments was only by writ of error and limited to questions of law. Appeals based on an excessive verdict are a question of fact. At common law, reexamination of the facts could only be done by the trial court. Determining what standard a trial court judge should use by basing it on state law does disrupt the federal system, because it goes against the judge-jury relationship embodied in the federal court system. The controlling case should be Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257 (1989), holding that how damages are calculated is controlled by state law, but whether a new trial or remittitur should be ordered is controlled by federal law.

Discussion. The majority's analysis focuses on the policies of the Erie doctrine (non- discrimination and uniformity) in order to determine what law to apply. Mason v. American Emery Wheel Works Facts. Plaintiff Mason, a citizen of Mississippi, sued Defendant American Emery Wheel Works, a Rhode Island corporation, in a federal district court in Rhode Island for negligent manufacture of an emery wheel. Defendant filed motion to dismiss because Plaintiff and Defendant were not in privity of contract. The District Court dismissed the complaint reasoning that because the accident causing the injury took place in Mississippi, the District Court must apply the law of Mississippi. Mississippi requires privity of contract for a manufacturer to owe a duty of care to someone who uses its product. The District Court granted the motion relying on [Ford Motor Co. v. Myers, 117 So. 362 (Miss. 1928)], while noting that the holding in Ford Motor Co. is the exception to the majority rule. Plaintiff appealed. Issue. Must the District Court apply the case law of the Supreme Court of Mississippi pursuant to the Erie doctrine even though the Court's holding is dated and contrary to the majority rule? Held. No. Reversed and remanded. The Supreme Court of Mississippi would not decide a case like Ford Motor Co. the same way if the issue were presented again.

It is not necessary that a case be explicitly overruled in order to lose its persuasive force as an indication of the law. In E.I. Dupont De Nemours & Co. v. Ladner, 73 So.2d 249 (Miss. 1954), the Supreme Court of Mississippi, in dicta, approved of the modern doctrine of MacPherson v. Buick, 111 N.E. 1050 (1916), which does not require privity of contract in order to sue the manufacturer. Because the Supreme Court of Mississippi would probably overrule Ford Motor Co. when it was presented with such an opportunity, the District Court should not have applied the old case law to the case at hand.

Concurrence. It is clear that the dicta in E.I. Dupont implies that the Supreme Court of Mississippi no longer approves of the holding in Ford Motor Co. However, when the situation is less clear, applying the rule of this case will cause problems. Discussion. The majority's opinion demonstrates a situation where the federal court does not have to apply a state's case law under the Erie doctrine. However, the court as well as the concurring opinion, emphasize that the highest court of the state's intent not to follow the relevant case law must be clear.

Clearfield Trust Co. v. United States Facts. The United States issued a check to a recipient. The check was presumed to be stolen because the intended recipient never received the check. The check was cashed at a J.C. Penney with the recipient's forged signature. J.C. Penney turned the check over to Clearfield Trust Co., Defendant. Defendant collected the funds owed on the check from the Federal Reserve. The United States informed "interested parties" eight months after it learned that the intended recipient never received the check. The United States then sued Defendant based on its guaranty of all prior endorsements, to recover the amount of the check. The District Court ruled that Pennsylvania law applied and held that the United States was barred from bringing suit due to the eight month delay from learning of the forgery to notifying any parties about the forged check. The United States appealed and the Court of Appeals reversed. Defendant appealed to the Supreme Court. Issue. Does Pennsylvania law apply to determining the United States' right to recover on a forged check? Held. No. Affirmed. State law and the rule of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188(1938) does not apply to the rights and obligations of the United States. Rules governing the United States' right to issue commercial paper are founded in the U.S. Constitution. The United States issued the check pursuant to the U.S. Constitution, federal statutes and regulations. Holding that state law governs the United States' right to recover on a forged check would cause great uncertainty and inconsistent rules among the states. Thus, application of federal law is required so that the law governing such issues is uniform. Under federal law and case precedent, prompt notice is not a condition precedent to recovery. However, it may be a defense. The United States, when doing business, must do business the way others do business. The general rule is that if a drawee does not give prompt notice of the forgery, damage is presumed and the drawee is barred from recovering. However, in this situation, the burden should be on

Defendant to show damage for the delay in notifying Defendant of the forgery. Although there is evidence tending to show that the forger was likely to be caught if there was no delay, this is not good enough to show an actual injury. Discussion. This case illustrates that there is still a federal common law in a situation where the United States is a party and the issues involve rights and obligations of the United States that come from federal law. In this case, the Court must use case precedent to interpret the United States' right as drawee to collect on a forged check. The Court's creation of a general rule regarding commercial paper demonstrates the Court's ability to create federal common law when circumstances warrant. Miree v. DeKalb County Facts. Miree and others, Plaintiffs, sued DeKalb County, Defendant in federal court based on diversity of citizenship, for injuries and wrongful death arising from an airline accident that occurred shortly after takeoff from an airport owned by Defendant. The only meritorious count of the complaint alleged that Defendant breached its contract with FAA, which required Defendant to restrict use of the land adjacent to the airport to activities compatible with airport activities (i.e., takeoff and landing). The complaint further alleged that Defendant maintained a garbage dump next to the airport that attracted birds. The birds were sucked into the plane in question's engine, which caused the crash. Plaintiffs further allege that they are third party beneficiaries of the contract and thus have standing to sue on the contract. The District Court held that Georgia law applied and that Defendant had governmental immunity and dismissed the complaint. Plaintiffs appealed and the Court of Appeal's panel held that state law allowed Plaintiffs to sue as third party beneficiaries and governmental immunity did not bar the suit. Defendant requested rehearing en banc. The Court of Appeals en banc held that federal law applied, which did not allow Plaintiffs to sue as third party beneficiaries. Plaintiffs appealed to the Supreme Court.

Issue. Does the United States have such a strong interest in this case such that federal common law, as opposed to state law, should apply to the issue of whether Plaintiffs have standing to sue? Held. No. Reversed and remanded. Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943), infra, requires federal law be applied when interpreting the rights and obligations of the United States and when there is a federal interest in uniformity such that applying state law in the situation would create uncertainty. The Solicitor General of the United States did not brief any issues in this case and stated that he would not do so unless requested by the Court. Therefore, the United States does not feel that its rights would be significantly affected by the outcome of the case. This case involves private parties and the issues that predominate are essentially local. Congress has not given a federal cause of action, which emphasizes a further lack of federal interest. Due to the speculative and remote nature of any federal interest, state law should apply.

Discussion. The opinion shows that the rule articulated in Clearfield Trust Co., infra, requires a determination of the rights and obligations of the United States, not other parties affected. In addition, even though federal law specifically states that a contract does not allow for a federal cause of action, this does not foreclose the possibility of a state cause of action pursuant to the federal law. This is why standing was analyzed under state law, to determine if

Georgia law would allow such a cause of action. Boyle v. United Technologies Corp. Facts. Petitioner is the personal representative of the estate of David Boyle, a marine helicopter pilot who died when he crashed in a helicopter manufactured by Respondent, United Technologies Corporation. Petitioner brought a diversity action in federal court against Respondent, but brought Virginia state tort claims against Respondent. The jury awarded damages to Petitioner, and Respondent moved for a direct verdict notwithstanding the judgment under the federal military contractor defense. The trial court denied the motion, but the United States Court of Appeals for the Fourth Circuit reversed and allowed Respondent the defense. Petitioner argued that there was no express statutory authority to immunize Respondent. Issue. The issue is whether Respondent can use a federal defense that protects military contractors against state tort law claims. Held. The majority of the United States Supreme Court held that there were unique federal interests that require the preemption of state law when a significant conflict exists between federal and state law, even when there is no express legislative authority to do so. The federal governments contracting for military equipment would be considered a unique federal interest. Therefore the case should be remanded to determine whether the helicopter conformed to the federal governments specifications and the supplier warned the government about dangers known to the contractor and not the government. Dissent. Supreme Court Justice William Brennan argued that the Court did not have the authority to create federal common law to allow immunity to government contractors. The immunity should be granted by the legislature. Supreme Court Justice John Stevens argued that the decision to immunize contractors should be left to Congress.

Discussion. The majority did not want states to have the power to reach parties that were working with the federal government on issues that are solely in the domain of the U.S. government. The contractors are acting as an extension of the federal government. Dice v. Akron, Canton & Youngstown R. Co. Facts. Plaintiff Dice, a railroad employee, sued Defendant Akron, Canton & Youngstown R. Co. in Ohio state court under FELA for injuries sustained on the job. Defendant asserted that Plaintiff had signed a release. Plaintiff argued that Defendant told Plaintiff that the "release" was a receipt for back wages and Plaintiff never consented to release Defendant of liability. This issue as well as the issues of liability was presented to the jury. The jury returned a verdict for Plaintiff. The trial judge reversed the judgment notwithstanding the verdict on the grounds that Plaintiff could read and was of reasonable intelligence so that he could not argue that the release was not binding. The intermediate appellate court reversed, stating federal law applied and that the judge could not reverse the jury's verdict because there was enough evidence of Defendant's fraud. The Supreme Court of Ohio reversed the intermediate appellate court, stating that Ohio law applied and that under Ohio law, a person of reasonable intelligence that can read must be bound by the signed release notwithstanding Defendant's false statements and that facts pertaining to fraud are decided by the judge and not the jury. Plaintiff appealed to the Supreme Court of the United States. Issue. Does state law apply to the validity of releases under FELA? Held. No. Reversed and remanded.

The federal right given an individual under FELA and the parameters of such must be determined by federal law. Under federal law, a release is not valid if procured by the false and misleading statements of Defendant's representatives. Applying Ohio law and consequently making the release valid if Plaintiff was negligent in not reading it would defeat the purpose of FELA of giving employees a right to recover against their employers. In addition, there is a federal policy of not allowing individuals to escape liability through fraudulently obtained releases. Plaintiff has a right under FELA and the Seventh Amendment to a trial by jury. This cannot be taken away by Ohio's law giving the judge permission to decide the issue of fraud in the context of a release.

Concurrence. Justice Frankfurter found that the majority's decision that the validity of the release is determined by federal law to be correct. However, the requirement by the Court that state courts in FELA cases have juries determine issues of fraud is contrary to the policy of allowing states to govern their own court systems. There is no case nor statute requiring that states give jury trials for FELA cases so long as the state court does not have jury trials for negligence cases. The majority opinion requires Ohio to treat its FELA cases differently than other negligence cases. This is undue interference with the state court system and because it is not required by any precedent or statute, it should not be imposed on the state courts. Discussion. The majority illustrates the supremacy of federal law in state court action when the action is brought pursuant to a federal right, such as under FELA. In order to reach its decision, the Court had to determine that the Ohio rule permitting state court judges to determine if fraud had occurred was a substantive rule affecting the claim of the Plaintiff based on federal law. Because the effect of the application of the state court rule regarding judicial finding of fraud is to, in its application to the facts presented here, preclude the Plaintiff's federal law claim, the state court rule may not be applied.