Procedure, Substance, and Erie

This Article examines the relationship between procedure and substance, and the way in which that relationship affects Erie questions. It first suggests that "procedure" should be understood in terms of process-in other words, in terms of the way that it changes the substance of the law and the value of legal claims. It then argues that the traditional view that the definitions of "procedure" and "substance" change with the context-a pillar on which present Erie analysis is based-is wrong. Finally, it suggests a single processbased principle that reconciles all of the Supreme Court's "procedural Erie" cases: that federal courts can apply their own rules to process a claim as long as, in a costless and outcome-neutral world, those rules do not affect the ex ante value of a claim at the time of its filing. I. PROCEDURE AND CHANGE 882 A. Procedure as Process 883 B. How Process Changes Entitlements and Values ..... 885 C. The Inevitability of Change 891 D. Theoretical Commitments Behind "Procedure as the Agency of Change" 893 II. VIEWING ERIE PROBLEMS THROUGH A PROCESS LENS ....... 896 III. A SINGLE PRINCIPLE FOR ERIE CASES 905 A. Describing the Principle 905 B. Applying the Principle to Shady Grove 913 C. A Test Case 917 D. Justifying the Principle Normatively 918 CONCLUSION 923 Using the Supreme Court's Shady Grove1 decision as its foil, this Article examines the nature of procedure, procedure's relationship to substance, and the Erie questions that arise when the procedural rules that federal and state courts use to adjudicate state-law claims vary. I conclude that the result in Shady Grove was correct - that a federal court should adopt the federal class-action rule even though New York's procedural code would have barred a New York state court from proceeding with the same case on a class-wide basis. I come to this result, however, not for the reasons offered either in Justice Scalia's plurality opinion or in Justice Stevens' concurrence.2 The Article's point of departure is the one matter on which Justice Scalia, Justice Stevens, and Justice Ginsburg, who authored the dissent, agreed: procedural rules affect the outcomes of lawsuits.3 The outcome-affecting consequences of procedural rules frame the .Erie/Rules Enabling Act problem with which courts have wrestled since Erie. Erie itself commanded that federal courts apply state substantive law, rather than "federal general common law," to claims that lie within diversity jurisdiction.4 The hard question, of which Shady Grove is the most recent iteration, is the extent to which Erie's penumbra - as well as the similar requirement of the Rules Enabling Act that no Federal Rule of Civil Procedure ("Federal Rule") "abridge, enlarge or modify any substantive right"5 - commands the same result with respect to procedural rules. For, even if a federal court applies the same substantive law that a state court would apply, the outcome - influencing potential of procedural rules means that a federal court applying federal procedural rules to a state-law claim might arrive at an outcome different from that of a state court applying the relevant state's procedural rules to the same claim. The Court has not walked a straight line in resolving this problem; with nearly every case, the Court seems to correct course or careen in a different direction.6 The Court has, however, settled on an analytical structure, which was delineated in Hanna v. Plumer1 and refined in John Hart Ely's exegesis of Hannah This analysis cleaves the choice-of-procedural-law question into two halves - a Rules Enabling Act branch and a "procedural Erie" (or Rules of Decision Act) branch. …