The true constitutional foundation of the Erie doctrine: non-delegation?

|The Volokh Conspiracy |

I've recently been blogging about my new article, The Inherent-Powers Corollary: Judicial Non-Delegation and Federal Common Law, which I've posted to SSRN. Here's a link to my initial post; here's a link to my second post, explaining how the non-delegation doctrine applies to delegations to the judiciary and why this makes sense; and here's a link to my third post, where I discussed my basic thesis—that the non-delegation has an "Inherent-Powers Corollary", under which delegations are judged more charitably if they are into an area where the delegate already has inherent power. (The Inherent-Powers Corollary also has an "Interlinking Principle", under which all that's necessary is that the delegated power be interlinked with (not necessarily actually within) the delegate's inherent powers.)

Last time, I started applying this principle to actual delegations. My first example was Congress's delegation to courts of procedural rulemaking power—recently in the Rules Enabling Act, though similar delegations have been common throughout U.S. history. I concluded that these delegations are generally easy cases, since courts have an inherent power (concurrent with, and generally subordinate to, Congress's power) to organize their own procedure; thus, the Inherent-Powers Corollary makes these delegations constitutional even though they usually come with no intelligible principle. However, I argued, it's unconstitutional for Congress to provide that later-enacted rules supersede (even later-enacted) contrary statutes.

Today, having gotten judicial rulemaking out of the way, I'll talk about judicial adjudication, where discretion generally takes the form of "common-lawmaking". Today's topic will be the constitutional basis of the Erie doctrine.

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Erie Railroad Co. v. Tompkins is best known for its statement that "[t]here is no federal general common law." In later sections, I'll discuss all the specific federal common law that still exists-for instance, in particular enclaves like admiralty, areas involving uniquely federal interests, and interstitial areas of federal statutes-and, unlike the old "general law," is really federal law and is thus also binding in state courts. But for now, let's just concentrate on the core meaning of Erie: that federal courts generally lack the power to make substantive rules of decision in diversity cases where, were the case brought in state court, a rule of state law would apply.

While Erie is clearly foundational and widely accepted, it's never been clear what (if anything) Erie's constitutional holding is.

Perhaps Erie is just a statutory interpretation decision about the Rules of Decision Act, which provides that "[t]he laws of the several states . . . shall be regarded as rules of decision" in federal court. Previously, "laws of the several states" had been interpreted to only mean state statutory law; now we understand it to also include state decisional law. This would imply that Congress could reestablish the Swift v. Tyson regime by statute, if it wanted to.

But Erie presented itself as a constitutional decision, and later cases have confirmed this. So what part of the Constitution did the Swift v. Tyson rule violate? Most proposed constitutional theories, whether stated in the opinion itself or developed after the fact, have come under severe critique-whether it's the Equal Protection Clause, enumerated powers, the Supremacy Clause, or federalism.

To fill this gap, Aaron Nielson has suggested a judicial non-delegation account. If Congress, in 1938, had authorized the President (without any further guidance) to make uniform rules of commercial law to govern when a state doesn't have a statute on point, such a statute would surely be unconstitutional under Panama Refining and Schechter Poultry. But that statute (with "President" replaced by "federal courts") is essentially how the courts had understood the Rules of Decision Act before Erie. Because the hypothetical statute would have been an unconstitutional delegation to the President, so should the Rules of Decision Act (so construed) have been considered an unconstitutional delegation to the courts; and Erie, which picks the opposite construction, is thus justified as a non-delegation decision.

The Inherent-Powers Corollary suggests that this explanation is incomplete. Perhaps the Rules of Decision Act does violate the non-delegation doctrine, but this conclusion requires more than just observing that the Act lacks an intelligible principle.

The Non-Statutory Erie Principle

Certainly, a Rules of Decision Act that is interpreted to authorize special rules of decision for federal courts is a type of delegation, and so the non-delegation doctrine is implicated. It's true that such an act doesn't provide any guidance as to what those rules of decision should involve. But under the Inherent-Powers Corollary, whether this lack of guidance is acceptable depends on whether the federal courts would have had a preexisting power to create such rules in the absence of the statute. (If the answer is no, then we have to proceed to the Interlinking Curlicue and see whether such a power would have been interlinked with the judicial power).

To judge whether federal courts would have had a preexisting power in the absence of the statute, let's imagine a world where there had never been a Rules of Decision Act. Could federal courts have validly made general law? Modern doctrine says no. It's long been held-since years before Erie-that the Rules of Decision Act was "merely declarative of the rule which would exist in the absence of the statute." This is why, even though the Act originally said only that state law would be a rule of decision "in trials at common law" and didn't mention equity, federal courts also followed state equity statutes in the Swift v. Tyson period-and Erie's holding was quickly applied to state decisional equity rules.

So however we understand the narrow Erie case, the broad Erie principle is about more than just the Rules of Decision Act. We should understand the Erie principle to mean that-regardless of the Act-federal courts lack the power to create "general law." If the Erie principle stands for this, then it can't be driven by the non-delegation doctrine, since the non-delegation doctrine only constrains what statutes Congress can pass. Perhaps there are some constitutional limits that prevent federal courts' policymaking via federal common law from going too far, but the non-delegation doctrine isn't the place to find them.

Nielson suggests that "if delegated authority to make common law can be unconstitutional because of nondelegation principles, then 'federal common law' that is created outside of any plausible delegation from Congress is surely more constitutionally problematic still." I'm not sure this is true-the whole point of the Inherent-Powers Corollary is that different actors have different inherent powers, and a congressional delegation outside of those inherent powers is judged more strictly than action (with or without congressional delegation) within those powers.

But even if it is true, it undermines the claim that Erie is about non-delegation. For if federal common law created outside of any delegation is constitutionally problematic, it must be for some reason other than the non-delegation doctrine. This opens up the possibility for all sorts of constitutional objections to federal common-lawmaking, none of which have anything to do with non-delegation-which can then also serve as justifications for the Erie doctrine.

Indeed, Nielson's interpretation of Erie as a non-delegation decision leads to a funny result. Federal courts have the power to make common law in particular enclaves like admiralty cases and border disputes, and this power doesn't stem from any congressional delegation. Doesn't this pose a problem for a view that the Erie rule is mandated by non-delegation concerns? Nielson's first answer is that these are sui generis cases, with their own idiosyncratic history. But his second, "more profound," answer is: "Why assume that those enclaves are constitutionally permissible?" Perhaps all such federal common-lawmaking should now be viewed as suspect.

But once the Rules of Decision Act (whether in its current Erie or its older Swift v. Tyson interpretation) is properly seen as stating a pre-statutory rule, it becomes clear that this rule doesn't stem from a delegation. So the legitimacy of federal common law-whether in diversity or in admiralty cases-must derive from somewhere other than non-delegation principles. Non-delegation principles can't tell us whether there is an inherent power to make federal common law; rather, whether there is a power to make federal common law informs the inquiry of whether and how the non-delegation doctrine applies.

What, then, is the true constitutional basis of Erie? Here's my personal view, though this isn't the place to defend it: Erie has two constitutional components.

The first is purely a federalism component. Federal courts do have the power to make federal common law, and indeed they do so today in many contexts where there are gaps in federal law or other important federal interests. But a respect for federalism requires that courts not make federal common law when such a federal interest is lacking; perhaps a federal interest can be shown in particular cases, but it can't be presumed generally. (Perhaps such a federal interest could have been shown in the case of tort standards along railroad rights-of-way in Erie itself, so this first component of the theory doesn't necessarily account for the specific result in Erie.)

The second component of Erie sounds mostly in Article III and supremacy considerations: Even where there is a federal interest, the common law that federal courts make (if it's substantive) must be actual law that's binding in all courts and preempts state law-not the pre-Erie "general law" that, because it didn't purport to bind anyone but federal courts, wasn't even really federal law. But there's a federalism component here too: substantive differences in the law that applies in state and federal courts gives rise to forum-shopping and undermines state judiciaries.

Statutory Erie

Where does that get us so far? We know that federal courts lack the inherent power to make federal common law, and we know this independently of non-delegation principles. Therefore, the broad Erie rule can't be an application of the non-delegation doctrine.

But Erie also stands for the proposition that the Swift v. Tyson reading of the Rules of Decision Act is unconstitutional; that is, Congress can't impose the Swift v. Tyson regime by statute. Now that we know that the power to make general law isn't part of federal courts' inherent powers, we need to figure out whether Congress can impose such a regime without providing an intelligible principle.

The Inherent-Powers Corollary, in its simple form, could answer this immediately: if Congress is delegating outside of federal courts' inherent powers, it needs to legislate with more specificity, as required by the non-delegation doctrine. But there remains the matter of the Interlinking Curlicue. Even if federal courts lack the inherent power to make general law, we still have to decide whether such a power is interlinked enough with federal courts' inherent power that Congress can direct federal courts to make such general law by statute even without an intelligible principle.

This question is hard to answer, because we don't really know what "interlinked" means. What did it take for the President's power to ban arms sales to the Chaco or to define death-eligible military offenses to be "interlinked" with his core areas of power? Was it just because the subject matter related to foreign affairs or the military? If so, one could easily say that the hypothetical Swift v. Tyson statute is interlinked with judicial power, because the power to make rules of decision for federal courts relates to federal courts' power to hear diversity cases and other cases within their jurisdiction. And if so, it would be hard to see what plausible delegations to the judiciary in its adjudicative capacity could ever invoke the ordinary non-delegation doctrine-everything courts do in deciding cases relates to their core function of deciding cases within their jurisdiction, and even their quasi-legislative activity of writing Sentencing Guidelines has been held to be "appropriate to the central mission of the Judiciary." Perhaps a judge-written tax code would be out of bounds.

On the other hand, one could imagine a stricter version of what "interlinked" means in the judicial context. In the specific context of Erie, perhaps we can rely on the same issue I alluded to above-that the concept of "general law," in the sense of a rule of decision that applies only in federal court, is fishy, and perhaps not really law at all. Judges should apply the law; sometimes they make law, but since they're federal actors, that law is federal law; and by the Supremacy Clause, federal law must both apply in state courts and preempt state law. If general law isn't really law, one can argue that it's also not interlinked with the judiciary's inherent power, so the Inherent-Powers Corollary doesn't apply. And so, if it's even valid at all for Congress to direct federal courts to apply their own substantive rules that apply nowhere else (which I doubt), it should do so with an intelligible principle and not the sort of "in the light of reason and experience" language found in Federal Rule of Evidence 501 or similar statutes.

The non-delegation verdict on Erie is thus complicated, because there are two Erie principles, one about inherent judicial power and one about congressional power to enact the Rules of Decision Act. Once we disentangle these two principles, we can see that federal courts lack the inherent power to make general law for reasons independent of the non-delegation doctrine. Only then can we examine whether the Rules of Decision Act, if interpreted on Swift v. Tyson lines, violates the non-delegation doctrine. It does-but we know this only because we've already applied the Inherent-Powers Corollary, figured out that there's no inherent power in federal courts, and therefore concluded that an intelligible principle is required.