JOURNAL OF LAW , ECONOMICS & POLICY VOLUME 10 FALL 2013 NUMBER 1 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah Mernin Executive Editor Publications Editor Managing Editor Michael Rogers Maxwell Slackman Kelly Fryberger Senior Articles Editor Senior Notes Editor Senior Research Editor David Dubin Erica Peterson Victoria Clarke Preston Wise Notes Editor Ian Rothfuss Articles Editors Research Editors Preston Wise Kevin Hill Articles Selection Editor Symposium Editor MEMBERS Josh Branson Ryan Leavitt Jonathan Stapor Marie Keiko Breyan Mariam Noori Charles Thresher Brady Cummins Catherine Oryl Allison Walsh Kyra Smerkanich CANDIDATE MEMBERS Ian Baldwin Jason Langford Daniel Russell Sam Banks Damian Martin Daniel Schneider James Beaty Daniel McCain Karen Schroeder Roger Gibboni Jenny Min David Scott Jacob Hamburger Samantha Morelli Tamta Zhorzholiani Jeff Kuhlman Temitope Odusami BOARD OF ADVISORS Lisa E. Bernstein Francesco Parisi James M. Buchanan Eric Posner Judge Guido Calabresi Judge Richard A. Posner Lloyd R. Cohen Roberta Romano Robert D. Cooter Hans-Bernd Schäfer Robert C. Ellickson Steven M. Shavell Richard A. Epstein Henry E. Smith Judge Douglas H. Ginsburg Vernon L. Smith Mark F. Grady Gordon Tullock Bruce H. Kobayashi Thomas S. Ulen Henry G. Manne W. Kip Viscusi A. Douglas Melamed Todd J. Zywicki i 1 ii JOURNAL OF LAW , ECONOMICS & POLICY VOLUME 10 FALL 2013 NUMBER 1 CONTENTS ARTICLES 1 INTRODUCTION: ERIE RAILROAD AT SEVENTY-FIVE Michael S. Greve & Richard A. Epstein 17 A GENERAL DEFENSE OF ERIE RAILROAD CO. V. TOMPKINS Ernest A. Young 125 ERIE’S STARTING POINTS:THE POTENTIAL ROLE OF DEFAULT RULES IN STRUCTURING CHOICE OF LAW ANALYSIS Allan Erbsen 151 AN EMPIRICAL STUDY OF THE EFFECT OF SHADY GROVE V.ALLSTATE ON FORUM SHOPPING IN THE NEW YORK COURTS William H.J. Hubbard 173 A POX ON BOTH YOUR HOUSES:WHY THE COURT CAN’T FIX THE ERIE DOCTRINE Suzanna Sherry 199 FEDERALIZED AMERICA:REFLECTIONS ON ERIE V. TOMPKINS AND STATE-BASED REGULATION Samuel Issacharoff 225 IN PRAISE OF ERIE—AND ITS EVENTUAL DEMISE Robert R. Gasaway and Ashley C. Parrish 251 OFF THE TRACK OR JUST DOWN THE LINE? FROM ERIE RAILROAD TO GLOBAL GOVERNANCE Jeremy Rabkin iii 2 iv 2013] 1 INTRODUCTION: ERIE RAILROAD AT SEVENTY-FIVE Michael S. Greve & Richard A. Epstein INTRODUCTION On April 25, 2013, Erie Railroad v. Tompkins1 celebrated its seventy- fifth anniversary. Justice Louis Brandeis’s farewell present as he departed from the Supreme Court after twenty-two years of service is a familiar staple of American law. Like Cher or Madonna, it enjoys one-named rec- ognition (among lawyers, in any event). Erie’s core holding—in diversity cases where no federal constitutional or statutory rule applies, federal courts will follow state law2—is hornbook teaching. Judicial decisions over the decades have offered differing, sometimes inconsistent applications and answers to a wide range of “Erie questions.” Even so, the decision appears unassailable and in robust condition, as a rock-bottom foundation of Amer- ican legal practice and learning. That first impression, however, may not be the whole story. A profusion of critical law review articles and books over the past few years demonstrates that much remains to be said about Erie after all these many decades, above and beyond what every 1L Civil Proce- dure student learns about the case. Hence, this issue. The essays were first presented and discussed in a series of academic workshops, conducted at the American Enterprise Institute (AEI) and gene- rously supported by AEI’s National Research Initiative. We organized the events to contribute to a critical reexamination of Erie—mindful, to be sure, of its deep entrenchment in our jurisprudence, but open to the thought that not all may be well with the legal edifice erected on Erie’s foundation, or perhaps with the foundation itself. We did not strive for any political, ideo- logical, or jurisprudential balance. Instead, we invited first-rate scholars who, we surmised, would have something new and important to say about Erie Railroad. Our lodestar, or at any rate an inspiration, was Henry J. Friendly’s legendary lecture In Praise of Erie,3 delivered on the occasion of Erie’s twenty-fifth anniversary a half century ago—an essay whose staying power has, predictably, made it an object of inquiry by our authors today. We are grateful for AEI’s support and sponsorship. And we thank the authors for accepting our invitation and, above all, for rewarding the work- shop participants and now their readers far beyond our hopes and expecta- 1 304 U.S. 64 (1938). 2 Id. at 78. 3 Henry J. Friendly, In Praise of Erie—and of the New Federal Common Law, 39 N.Y.U. L. REV. 383 (1964). 3 2 JOURNAL OF LAW, ECONOMICS & POLICY [VOL. 10:1 tions. The authors’ probing, wide-ranging inquiries push far beyond the CivPro enclave in which Erie has often been cabined. They do so in vari- ous ways and directions but on the basis of what looks to us like a consen- sus: by and large, the authors understand Erie as a Conflicts case.4 The con- flicts arise from the fact that ours is by constitutional design a federal sys- tem, which generates conflicts vertically (between the states and the nation- al government) and horizontally (among states). Thus, Erie necessarily assumes constitutional proportions. This inescapable constitutional dimen- sion in turn prompts still deeper questions about Erie’s jurisprudential foundations. The essays cover the full range of those questions; our brief introduction serves to develop some common themes. Justice Brandeis’s Erie opinion provides a convenient reference point for grouping the themes under three headings: statutory and pragmatic con- siderations; constitutional arguments; jurisprudential foundations. Sections II, II, and IV develop those themes, respectively. We have also arranged the essays with that thematic order in mind.5 Section V has a more reflec- tive and, if you will, historicist quality. Like all key Supreme Court deci- sions, Erie reflects the political fervors of its time (several contributors place the decision in its historical context.). Something similar is true of Erie’s reception, interpretation, and adaptation to changing social and polit- ical conditions over the last seventy-five years. But the historical arc, punc- tuated by—obviously, somewhat arbitrary—quarter-century milestones, presents a bit of a puzzle. Erie’s twenty-fifth anniversary prompted Henry Friendly’s famous celebration of Erie’s “synthesis” of federal and state law and courts and of a “new” federal common law that would adapt Erie to the constitutional structure and to the demands of the modern state. It reflected a moderate, domesticated New Deal Constitution, which fit the spirit of the times. Erie’s fiftieth anniversary in 1987 provides a striking contrast. The 1980s were a time of sharp academic and political debate over the role of courts and of a conservative “revolution” that to some minds amounted to an at- tempted coup against the New Deal Constitution.6 Somehow, however, the debate of the 1980s bypassed Erie entirely: Erie’s golden anniversary gen- erated a few articles on its perennial Civil Procedure difficulties, but no serious examination of its foundations, its broader themes and questions, or for that matter its continued wisdom. Just those questions, though, have 4 E.g., Gasaway & Parrish, at p. 226; Sherry, at p. 178; Erbsen, at p. 132. They are not alone. See, e.g., Kim Roosevelt III, Choice of Law in Federal Courts, From Erie to Klaxon to CAFA and Shady Grove, 106 NW. U. L. REV. 1 (2012). 5 Ernest Young’s emphatic “Defense of Erie” appears first in this volume because it covers all three themes and, along the way, also provides a lucid and comprehensive survey and discussion of the recent scholarly literature. 6 See, e.g., BRUCE A. ACKERMAN, WE THE PEOPLE: TRANSFORMATIONS 391–400 (1998). 2013] INTRODUCTION: ERIE RAILROAD AT SEVENTY-FIVE 3 now risen to prominence. As Ernest Young observes, “Erie finds itself under siege . from a rising chorus of academic criticism.”7 Our explanation of this curious trajectory centers on the interplay be- tween jurisprudential theory and real-world politics. Contrary perhaps to the insistence of legal realists and “democratic constitutionalists,” those two powerful forces do not always run parallel. Their congruity, tensions, and conflicts have powerfully shaped Erie itself and its reception over the dec- ades. Our broad-brush sketch of the trajectory ends on a happy and, we trust, consensual note: the contemporary attacks on Erie have come from all sides of the political spectrum, as have the defenses. When political and jurisprudential commitments get scrambled, debate about law and the Con- stitution brings out the best in scholars, as they begin to question not only their opponents’ commitments but also their own. Along with a fair bit of confusion, much good comes from such intellectual ferment. Issues are joined with greater clarity, and once unexplored connections force their way to the surface: witness this issue. STATUTORY AND PRAGMATIC ARGUMENTS Justice Brandeis’s Erie opinion, after a brief recitation of the facts of the case, began on a low-key, statutory note: Justice Story’s opinion in Swift v. Tyson,8 it contended (“First”), had misinterpreted Section 34 of the 1789 Judiciary Act, subsequently codified as the Rules of Decision Act (RDA).9 Recent research proffered by Charles Warren, Brandeis wrote, showed that federal courts should follow state common, as well as statutory, law in di- versity cases where no federal rule of decision applied. Brandeis continued (“Second”) that the contrary rule of Swift had produced practical “de- fects”—“unfairness” among litigants, generated by forum-shopping be- tween state and federal law.10 (Brandeis cited the notorious Black & White Taxicab case11 as an example.)12 Ernest Young valiantly defends Brandeis on both points; other contributors disagree.