Opinion ID: 525101
Heading Depth: 2
Heading Rank: 2

Heading: the application of the erie doctrine

Text: 20 We start our de novo review with the Erie doctrine. Almost every time a federal court sitting in diversity decides a matter, Erie concerns are implicated. In today's world of well-developed federal and state law, both state and federal law often provide a means to resolve a legal issue in dispute. Consistent with the principles the Supreme Court espoused in Erie, a federal court must determine whether to apply federal or state law to settle the disputed issue. The question of which law to apply is a sticky one, see Stewart Org., Inc. v. Ricoh Corp., 779 F.2d 643, 645 (11th Cir.), vacated, 785 F.2d 896 (11th Cir.1986), and is best understood by examining Erie and its progeny. 21 Erie eliminated the existence of independent federal common law in diversity cases by overruling Swift v. Tyson, 41 U.S. (16 Pet.) 1, 10 L.Ed. 865 (1842). The Court denounced Swift as an improper assumption by the federal courts of a power to declare rules of decision which Congress was confessedly without power to enact as statutes. Erie, 304 U.S. at 72, 58 S.Ct. at 819. Justice Brandeis believed the principles espoused in Swift invaded rights the Constitution reserved for the several states. Id. at 80, 58 S.Ct. at 823. Moreover, the Court was concerned that Swift allowed forum shopping. Id. at 75, 58 S.Ct. at 820. By deciding that a federal court sitting in diversity must apply the law of the state in which it sits, the Court in Erie primarily sought to discourage forum shopping by having federal decisions mirror those of a court in the forum state. 22 After almost three decades and many decisions analyzing Erie, 10 the Supreme Court attempted to formulate a final, feasible test in Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). Hanna and its progeny provide the current methodology to determine whether to apply federal or state law where the two seemingly conflict. 23 Under the Hanna approach, when the federal law sought to be applied is a congressional statute or Federal Rule of Civil Procedure, the district court must first decide whether the statute is sufficiently broad to control the issue before the court. Hanna, 380 U.S. at 471, 85 S.Ct. at 1144 (1965); Walker v. Armco Steel Corp., 446 U.S. 740, 749-750, 100 S.Ct. 1978, 1984-1985, 64 L.Ed.2d 659 (1980); Burlington Northern R. Co. v. Woods, 480 U.S. 1, 107 S.Ct. 967, 94 L.Ed.2d 1 (1987). In making this determination, the district judge engaged in straightforward statutory interpretation to determine whether the statute covers the disputed issue. See Stewart Org., 108 S.Ct. at 2242 (citing Walker v. Armco Steel Corp., 446 U.S. at 750 and n. 9, 100 S.Ct. at 1985 and n. 9; Burlington Northern R. Co. v. Woods, 107 S.Ct. at 971). If the federal statute covers the point in dispute, the district court proceeds to inquire whether the statute represents a valid exercise of Congress' authority under the Constitution. See Hanna, 380 U.S. at 471, 85 S.Ct. at 1144. 11 If Congress intended to reach the issue before the District Court, and if it enacted its intention into law in a manner that abides by the Constitution, that is the end of the matter. Stewart Org., 108 S.Ct. at 2242.  'Federal courts are bound to apply rules enacted by Congress with respect to matters ... over which it has legislative powers.'  Id. (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)). 24 If a federal statute or Rule of Civil Procedure does not sufficiently cover the disputed issue, Hanna requires that the district court consider the applicability of federal judge-made law. This analysis requires the court to evaluate whether application of federal judge-made law would disserve the twin aims of the Erie rule: discouragement of forum shopping and avoidance of inequitable administration of the laws. Stewart Org., 108 U.S. at 2243 n. 6 (citing Hanna, 380 U.S. at 468, 85 S.Ct. at 1142). If applying the relevant judge-made law would denigrate these policies, the district court should apply state law. See Walker v. Armco Steel Corp., 446 U.S. 740, 752-753, 100 S.Ct. 1978, 1986, 64 L.Ed.2d 659 (1980). 25 With this background, we now conduct the Hanna inquiry. The first step is to precisely define the issue. See Stewart Org., 108 S.Ct. at 2243. The simple issue before this court is whether the district court properly granted a motion to dismiss for a lack of personal jurisdiction. The central focus of the analysis, however, must be the effect of the personal jurisdiction conferral clause. Accordingly, the specific issue presented is whether a federal court sitting in diversity should apply state or federal law to determine the effect of a contractual provision conferring personal jurisdiction on a motion to dismiss for lack of personal jurisdiction. 26 The first inquiry under Hanna is whether a federal statute or Federal Rule of Civil Procedure sufficiently covers the disputed issued. Federal courts have consistently held that no federal statute or Rule of Civil Procedure controls issues of personal jurisdiction. In Arrowsmith v. United Press International, 320 F.2d 219, 225-227 (2d Cir.1963) (en banc), Judge Friendly conducted an exhaustive study of all possible federal statutes or Rules that may cover issues of personal jurisdiction in diversity cases. He concluded that no federal statute or Rule of Civil Procedure speaks to the issue either expressly or by fair implication. Id. at 225. Similarly, the Ninth Circuit recently found that, in a motion-to-dismiss context, no federal statute or Rule of Civil Procedure controlled the issue. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir.1988). Unlike Stewart Org.'s transfer of venue, Manetti-Farrow involved a forum selection clause and a motion to dismiss. Id. at 510. Again, the court found that no federal statute or Rule determined the effect of a forum selection clause on the adjudication of a motion to dismiss. Id. at 512 n. 2. Because no federal statute or Rule is directly on point, 12 the court now must engage in the second inquiry under Hanna. 27 After determining that no federal statute or Rule of Civil Procedure sufficiently covers the issue in dispute, the court now considers the relevant federal judge-made law. According to Hanna, if the application of federal judge-made law would encourage forum shopping and promote the inequitable administration of the laws, then the court must apply state law. Necessarily, this analysis requires the court to determine the scope of the federal judge-made law sought to be applied before deciding whether applying that law would disserve the twin aims of Erie. 28 Proudfoot urges that federal judge-made law in this case requires the enforcement of the personal jurisdiction conferral clause for two reasons. First, Proudfoot maintains that the Supreme Court's opinion in The Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), finding a forum selection clause enforceable under federal admiralty law, is binding here. Second, Proudfoot suggests that after Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), a conferral of personal jurisdiction clause acts as a waiver of the defendant's constitutional due process rights and thus is properly enforceable. 29 This aspect of federal common law, favoring the enforcement of conferral of personal jurisdiction clauses, differs sharply from Florida law. In Florida, conferral of personal jurisdiction clauses are not enforced unless an independent ground for personal jurisdiction exists under the Florida Long Arm Statute, Fla.Stat.Ann. Sec. 48.193 (West 1969 and Cumm.Ann.Supp.1989). See McRae v. J.D./M.D., Inc., 511 So.2d 540 (Fla.1987). 30 With this understanding of the significant difference between the relevant federal and state laws, the court can evaluate the federal judge-made law in light of the twin aims of Erie. The first concern, forum shopping, requires the court to ask whether applying the state rule would have so important an effect upon the fortunes of one or both of the litigants that failure to enforce it would be likely to cause a plaintiff to choose the federal court. Hanna, 380 U.S. at 468 n. 9, 85 S.Ct. at 1142 n. 9. A diverse plaintiff suing a defendant without any contacts in the forum state, but who has signed a conferral of personal jurisdiction clause, may file suit in federal or state court. A federal court would enforce the conferral of personal jurisdiction clause under federal law, and the action would proceed. The plaintiff suing the same defendant in state court would face dismissal for lack of personal jurisdiction, the contractual clause notwithstanding. This difference in outcomes indicates that a plaintiff with a choice of forum would file in federal court to escape the effect of the state law. 13 Accordingly, the application of federal judge-made law would disserve the first aim of Erie. 31 The court also must consider the related second aim of Erie, 14 the avoidance of the inequitable administration of the laws. To analyze the second aim, the court asks whether the state law is so important to the litigation that failure to enforce it would unfairly discriminate against citizens of the forum state. Hanna, 380 U.S. at 468 n. 9, 85 S.Ct. at 1142 n. 9. 15 The validity of a clause conferring personal jurisdiction is one of great importance to the litigation. When a defendant without any contacts in Florida is sued in Florida, an action brought in state court would be dismissed for lack of jurisdiction despite the conferral of jurisdiction clause. Conversely, the same action brought in federal court could proceed to judgment because of the contractual agreement to in personam jurisdiction. The citizens of the forum state are unfairly discriminated against in this situation because an action that would be barred in state court can proceed to judgment in federal court solely because of the fortuity that there is diversity of citizenship between the litigants. Walker v. Armco Steel Corp., 446 U.S. 740, 753, 100 S.Ct. 1978, 1986, 64 L.Ed.2d 659 (1980). Accordingly, the use of federal judge-made law in the present case would further the inequitable administration of the laws. 32 Because the application of federal judge-made law here would encourage forum shopping and promote the inequitable administration of the laws, we must apply state law to decide the issue presented. We now examine the relevant issues of Florida law.