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Federal Common Law: a Structural Reinterpretation

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Federal Common Law: a Structural Reinterpretation University of Pennsylvania Law Review FOUNDED 1852 Formerly American Law Register VOL. 144 APRIL 1996 No. 4 ARTICLES FEDERAL COMMON LAW: A STRUCTURAL REINTERPRETATION BRADFORD R. CLARKt TABLE OF CONTENTS INTRODUCTION ................................. 1247 I. FEDERAL COMMON LAW AND THE CONSTITUTIONAL STRUCTURE ...................... 1255 t Associate Professor of Law, George Washington University Law School. This Article benefitted significantly from comments offered byJerome A. Barron, David B. Goroff, Philip A. Hamburger, Alfred Hill, William K. Kelley, Chip Lupu,John F. Manning, Larry Mitchell, Henry P. Monaghan, Todd D. Peterson, RichardJ. Pierce, Jr.,Joshua I. Schwartz, and Theodore S. Sims, and from suggestions made by several of my colleagues at a faculty workshop. In addition, I am grateful to Stephen Devereaux '96,Jeffrey Hessekiel '96, and Eric Leonard '97 for their excellent research assistance in connection with this project. I would also like to thank Kevin B. Huff, Columbia '96, for providing very helpful comments and suggestions, andJoel Millar, Pennsylvania '96, for his extreme care and attention to detail in preparing this Article for publication. This Article is dedicated to my mother, Dr. Anna Lydia Motto, and to the memory of my father, Dr. John R. Clark. (1245) 1246 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 144: 1245 A. Erie andJudicial Federalism .................... 1256 B. "The New Federal Common Law". ................ 1264 II. RECONCEPTUALIZING MODERN FEDERAL COMMON LAW ................................ 1271 A. The Proposed Approach ........................ 1272 B. Swift v. Tyson Revisited ..................... 1276 C. The FederalCommon Law of Foreign Relations ...... 1292 1. The Act of State Doctrine ................. 1292 a. Application of the First Criterion ........... 1294 b. Application of the Second Criterion ......... 1300 2. The Schooner Exchange v. McFaddon: An Historical Example .................... 1306 III. FURTHER APPLICATION OF THE PROPOSED APPROACH ... 1311 A. Cases Affecting Ambassadors ................... 1311 B. ControversiesBetween Two or More States .......... 1322 C. Cases of Admiralty and MaritimeJurisdiction ........ 1332 1. Prize Cases . ........................... 1334 2. Private Maritime Claims ................... 1341 a. The Scope ofJurisdictionover PrivateMaritime Claims ................ 1341 b. The HistoricalPurpose ofjurisdiction over Private Maritime Claims ............. 1347 c. Reconceptualizing Federal Common Law Rules Governing Private Maritime Claims ...................... 1354 D. Cases Affecting the Rights and Obligations of the United States ......................... 1361 1. Adoption of Federal Common Law Rules Favoring the United States ................. 1361 a. Application of the First Criterion ........... 1362 b. Application of the Second Criterion ......... 1365 2. Preemption of State Law Rules Disfavoring the United States ........................ 1368 CONCLUSION ................................... 1375 19961 FEDERAL COMMON LAW 1247 The erection of a new government, whatever care or wisdom may distinguish the work, cannotfail to originate questions of intricacy and nicety; and these may, in a particularmanner, be expected toflowfrom the establishmentof a constitutionfounded upon the total orpartial incorpora- tion of a number of distinct sovereignties.' -Alexander Hamilton INTRODUCTION By design, our constitutional structure is complex and often cumbersome. The founders believed that the structural safeguards provided by federalism and separation of powers outweighed their costs. That calculation, however, has created numerous "questions of intricacy and nicety." "Federal common law," in particular, presents such questions. In every case, courts are confronted with a threshold issue: what is the source of the applicable law? In most cases, state law has been thought to establish background rules of decision that apply unless preempted by positive federal law.2 In this century, however, federal courts have found it increasingly appropriate in many areas to disregard state law in favor of so-called federal common law. Federal common law is generally used to refer to "federal judge- made law"-that is, rules of decision adopted and applied by federal courts that have the force and effect of positive federal law, but "whose content cannot be traced by traditional methods of 4 interpretation to federal statutory or constitutional command." 1 THE FEDERALIST No. 82, at 491 (Alexander Hamilton) (Clinton Rossiter ed., 1961). 2 See Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). In this Article, I use the phrase "positive federal law" to refer to law based on the positive acts of the people and their representatives, that is, federal statutes, treaties, and constitutional provi- sions. s Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 426 (1964). 4 PAUL M. BATOR ET AL., HART & WECHSLER'S THE FEDERAL COURTS AND THE FEDERAL SYSTEM 863 (3d ed. 1988) [hereinafter HART & WECHSLER]; see also Martha A. Field, Sources of Law: The Scope of Federal Common Law, 99 HARv. L. REV. 881,890 (1986) ("'[F]ederal common law'. refer[s] to any rule of federal law created by a court (usually but not invariably a federal court) when the substance of that rule is not clearly suggested by federal enactments-constitutional or congressional." (footnotes omitted)); Thomas W. Merrill, The Common Law Powers of Federal Courts, 52 U. CHI. L. REV. 1, 5 (1985) (defining "federal common law" as "any federal rule of decision that is not mandated on the face of some authoritative federal text-whether or not that rule can be described as the product of 'interpretation' in either a conventional 1248 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 144: 1245 Thus understood, federal common law raises serious constitutional questions. First, federal common law, because not clearly rooted in statutory or constitutional sources, appears to involve judicial lawmaking-a task at least in tension with federal separation of powers.5 To be sure, federal courts undoubtedly engage in interstitial "lawmaking," as part of the process of interpreting positive law.6 By hypothesis, at least, federal common lawmaking begins where interpretation ends.7 Such open-ended lawmaking by or an unconventional sense"). ' See Northwest Airlines v. Transport Workers Union, 451 U.S. 77, 95 (1981) ("[Flederal lawmaking power is vested in the legislative, not the judicial, branch of government.... ."); Martin H. Redish, Federal Common Law, PoliticalLegitimacy, and the Interpretive Process: An "Institutionalist"Perspective, 83 Nw. U. L. REV. 761, 765 (1989) (raising the "fundamental question oflegitimacy-whether it is appropriate for the judiciary to exercise this function within the broader political context of a carefully structured system of separation of powers"). 6 This phenomenon does not raise the same constitutional concerns as federal common law. Even strict adherents of the constitutional separation of powers acknowledge that "no statute can be entirely precise, and that some judgments, even somejudgments involving policy considerations, must be left to the officers executing the law and to the judges applying it." Mistretta v. United States, 488 U.S. 361, 415 (1989) (ScaliaJ., dissenting); cf. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 477 (1957) (Frankfurter, J., dissenting) ("Congress declares its purpose imperfectly or partially, and compatible judicial construction completes it."). In practice, of course, the distinction between federal common lawmaking and statutory (or constitutional) interpretation is often difficult to discern. See Henry P. Monaghan, The Supreme Cour4 1974 Term-Foreword: ConstitutionalCommon Law, 89 HARV. L. REV. 1, 31 (1975) ("Plainly, any distinction between constitutional exegesis and common law cannot be analytically precise, representing, as it does, differences of degree."). Indeed, the Supreme Court's tendency has been "to seek a statutory rationalization forjudge-made law in this class ofcases." Alfred Hill, The Law-Making Power of the Federal Courts: ConstitutionalPreemption, 67 COLUM. L. REV. 1024, 1041 (1967). For example, in Clearfield Trust Co. v. United States, after observing that the authority of the United States to issue a check for services rendered under the Federal Emergency Relief Act of 1935 "had its origin in the Constitution and the statutes of the United States," the Court asserted that "[t]he duties imposed upon the United States and the rights acquired by it as a result of the issuance find their roots in the same federal sources." 318 U.S. 363, 366 (1943) (footnote omitted). Similarly, in Lincoln Mills the Court construed § 301 of the Labor Management Relations Act of 1947 not only to "confer jurisdiction in the federal courts over labor organiza- tions," but also to express "a federal policy that federal courts should enforce [agreements to arbitrate grievance disputes] on behalf of or against labor organiza- tions." 353 U.S. at 455. Most recently, in Boyle v. United Technologies Corp., the Court suggested that a provision of the Federal Tort Claims Act retaining the federal government's sovereign immunity for claims based on the performance of discretion- ary functions establishes a "federal policy" that "in some circumstances" also requires immunity for federal contractors from state tort liability "for design defects in military equipment." 487 U.S. 500, 512 (1988). The Supreme Court's reliance on "the penumbra ofexpress statutory mandates" or "the policy of
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