Federal common law
Encyclopedia
Federal common law is a term of United States
law used to describe common law
that is developed by the federal courts
, instead of by the courts of the various states. The United States is the only country to combine the creation of common law doctrines with a complete federalism
, wherein the national supreme court has virtually no power to review state court decisions to determine whether the state courts have followed state laws. The High Court of Australia
is sometimes said to have federal common law, but because all state and territorial courts are directly appealable to the High Court, this is indistinguishable from a general common law. In contrast, the United States Supreme Court has effectively barred the creation of federal common law in areas traditionally under the authority of state courts. Nevertheless, there are several areas where federal common law continues to govern.
followed the doctrine set forth in the 1842 case of Swift v. Tyson
. In that case, the United States Supreme Court held that federal courts hearing cases brought under their diversity jurisdiction
(allowing them to hear cases between parties from different states) had to apply the statutory law of the states, but not the common law developed by state courts. Instead, the Supreme Court permitted the federal courts to make their own common law based on general principles of law.
The reasoning behind the decision in Swift v. Tyson was that the federal courts would craft a superior common law, and the states
would choose to adopt it. This hope was not fulfilled, however, as the principles of various states' common law continued to dramatically diverge. Some litigants began to abuse the availability of the federal courts for the specific purpose of having cases decided under the federal common law principles.
The Erie decision did not put an end to other types of federal common law. Several areas of federal common law remain, in two basic categories: areas where Congress has given the courts power to develop substantive law, and areas where a federal rule of decision is necessary to protect uniquely federal interests.
The U.S. Congress has given courts power to formulate common law rules in areas such as admiralty law
, antitrust
, bankruptcy law, interstate commerce, and civil rights
. Congress often lays down broad mandates with vague standards, which are then left to the courts to interpret, and these interpretations eventually give rise to complex understandings of the original intent of Congress, informed by the courts' understanding of what is just and reasonable.
Furthermore, in the 1943 case of Clearfield Trust Co. v. United States
, the Court recognized that federal courts could still create federal common law, albeit in limited circumstances where federal or Constitutional interests were at stake, Congress had inadequately addressed the situation sub judice, and the application of individual state laws in various jurisdictions would create unacceptable levels of diversity or uncertainty. When fashioning new federal common law, the Court may either adopt a reasonable state law, look to its own precedent, or create new law.
During the era when the Constitution was written, it was understood that common law was alterable by legislatures. For example, Alexander Hamilton
emphasized in The Federalist that the New York Constitution made the common law subject "to such alterations and provisions as the legislature shall from time to time make concerning the same." Thus, even when a federal court has authority to make common law, that law is subject to alteration by Congress. This principle finds expression in the first sentence of the Constitution: "All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives."
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
law used to describe common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
that is developed by the federal courts
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...
, instead of by the courts of the various states. The United States is the only country to combine the creation of common law doctrines with a complete federalism
Federalism
Federalism is a political concept in which a group of members are bound together by covenant with a governing representative head. The term "federalism" is also used to describe a system of the government in which sovereignty is constitutionally divided between a central governing authority and...
, wherein the national supreme court has virtually no power to review state court decisions to determine whether the state courts have followed state laws. The High Court of Australia
High Court of Australia
The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...
is sometimes said to have federal common law, but because all state and territorial courts are directly appealable to the High Court, this is indistinguishable from a general common law. In contrast, the United States Supreme Court has effectively barred the creation of federal common law in areas traditionally under the authority of state courts. Nevertheless, there are several areas where federal common law continues to govern.
The Swift doctrine
Until 1938, federal courts in AmericaUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
followed the doctrine set forth in the 1842 case of Swift v. Tyson
Swift v. Tyson
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York in which the Supreme Court of the United States determined that United States federal courts hearing cases brought under their diversity...
. In that case, the United States Supreme Court held that federal courts hearing cases brought under their diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
(allowing them to hear cases between parties from different states) had to apply the statutory law of the states, but not the common law developed by state courts. Instead, the Supreme Court permitted the federal courts to make their own common law based on general principles of law.
The reasoning behind the decision in Swift v. Tyson was that the federal courts would craft a superior common law, and the states
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
would choose to adopt it. This hope was not fulfilled, however, as the principles of various states' common law continued to dramatically diverge. Some litigants began to abuse the availability of the federal courts for the specific purpose of having cases decided under the federal common law principles.
The Erie doctrine
In 1938, the Supreme Court decided Erie Railroad v. Tompkins. Erie overruled Swift v. Tyson, holding instead that federal courts exercising diversity jurisdiction had to use all of the same substantive laws as the courts of the states in which they were located. As the Erie Court put it, there is no "federal general common law", the key word being "general."The Erie decision did not put an end to other types of federal common law. Several areas of federal common law remain, in two basic categories: areas where Congress has given the courts power to develop substantive law, and areas where a federal rule of decision is necessary to protect uniquely federal interests.
The U.S. Congress has given courts power to formulate common law rules in areas such as admiralty law
Admiralty law
Admiralty law is a distinct body of law which governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities which operate vessels on the oceans...
, antitrust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
, bankruptcy law, interstate commerce, and civil rights
Civil rights
Civil and political rights are a class of rights that protect individuals' freedom from unwarranted infringement by governments and private organizations, and ensure one's ability to participate in the civil and political life of the state without discrimination or repression.Civil rights include...
. Congress often lays down broad mandates with vague standards, which are then left to the courts to interpret, and these interpretations eventually give rise to complex understandings of the original intent of Congress, informed by the courts' understanding of what is just and reasonable.
Furthermore, in the 1943 case of Clearfield Trust Co. v. United States
Clearfield Trust Co. v. United States
Clearfield Trust Co. v. United States, 318 U.S. 363 , was a case in which the Supreme Court of the United States held that federal negotiable instruments were governed by federal law, and thus the federal court had the authority to fashion a common law rule.-Facts & procedural history:On April 28,...
, the Court recognized that federal courts could still create federal common law, albeit in limited circumstances where federal or Constitutional interests were at stake, Congress had inadequately addressed the situation sub judice, and the application of individual state laws in various jurisdictions would create unacceptable levels of diversity or uncertainty. When fashioning new federal common law, the Court may either adopt a reasonable state law, look to its own precedent, or create new law.
Congressional repeal of federal common law
Federal common law is valid only to the extent that Congress has not repealed the common law. The Supreme Court has explained that, "when Congress addresses a question previously governed by a decision resting on federal common law, the need for such an unusual exercise of law-making by federal courts disappears."During the era when the Constitution was written, it was understood that common law was alterable by legislatures. For example, Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
emphasized in The Federalist that the New York Constitution made the common law subject "to such alterations and provisions as the legislature shall from time to time make concerning the same." Thus, even when a federal court has authority to make common law, that law is subject to alteration by Congress. This principle finds expression in the first sentence of the Constitution: "All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives."