Federal Common Law Outline

• VII. Federal Common Law

  Background

The term federal common law (“FCL”) refers to “federal rules of decision whose content cannot be traced directly by traditional methods of interpretation to federal statutory or constitutional commands.” Unlike pre-Erie “general” common law, FCL is limited to areas of distinctively federal concern, but is capable of acting directly on the State courts through the Supremacy Clause.

In general, federal courts are competent to promulgate FCL where there are “uniquely federal interests” (e.g., Boyle) and there is no federal statutory law to apply. Uniquely federal interests may exist with respect to the rights of the United States in tort actions (Standard Oil), or with respect to commercial paper (Clearfield Trust), or with respect to the civil liability of federal officials for actions taken in the course of their duty (Boyle (citing cases)). Uniquely federal interests may also exist where private party litigation will “directly affect the terms of Government contracts” (Boyle) or threaten to create tort liability for adherence to federal rules (WDAY – note that this case seems to merge the “uniquely federal interest” and “significant conflict” inquiry that Boyle treats as analytically distinct). Finally, uniquely federal interests warranting the creation of FCL exist with respect to interstate disputes, foreign affairs disputes (Sabbatino), and admiralty cases.

Even if “uniquely federal interests” are found, it is necessary to demonstrate “significant conflict … between an identifiable federal policy or interest and the operation of state law,” or that “the application of state law would frustrate specific objectives of federal legislation” (Boyle). A lesser showing of conflict is required to establish competence to make FCL than would be required to establish preemption (Boyle).

COMPETENCE AND DISCRETION. In Clearfield Trust, the Court established FCL to govern the rights and duties of the United States on commercial paper that it issues. The Court reasoned (1) there must be some federal law to govern the rights of the United States in its capacity of sovereign; and (2) that, absent an act of Congress supplying such federal law, only federal courts could “fashion the governing rule of law.”

Judge Friendly criticized Clearfield Trust. Although he agreed that the federal courts had competence to formulate a FCL rule, he did not believe that the Court adequately discussed whether, as a matter of discretion, such a rule should be formulated. This distinction—between competence and discretion—has influenced subsequent decisions on FCL. For example, in Kimbell Foods, the Court reaffirmed Clearfield Trust’s competence holding, but held that “when there is little need for a nationally uniform body of law, state law may be incorporated as the federal rule of decision.”

THEORIES OF FCL. The first theory posits that federal courts possess general authority to craft common law whenever federal interests are at stake (i.e., in areas where Congress or the Executive could act). The second theory sees FCL as legitimate only when it is traceable to a source of federal authority—either the Constitution itself or a statutory grant.

Professor Hill’s version of the second theory argues that FCL is authorized by the structure of the Constitution in four areas: interstate controversies, admiralty, proprietary transactions of the United States, and international relations.

In D’Oench, Duhme & Co., Justice Jackson suggested that a statute establishing a federal program could be understood to include an implied delegation to judges to correct omissions in the scheme.

RULES OF DECISION ACT. The Rules of Decision Act provides that “the laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply.” FCL can be justified as displacing state law because the underlying federal law “otherwise require[s]” (DelCostello).

INCORPORATING STATE LAW AS A MATTER OF STATUTORY INTERPRETATION. The Court has often said that “in the absence of a plain indication to the contrary, Congress when it enacts a statute is not making the application of the federal act dependent on state law” (Jerome). For example, a federal bank robbery statute that prohibited entering a bank with intent to commit a “felony” did not incorporate each state’s definition of “felony” but referred only to federal felonies (Jerome). But in Beaver County, the Court held that a statute that permitted taxation of a federal agency’s “real property” meant to incorporate state law definitions of “real property.”

A JURISDICTIONAL GRANT IS NOT SUFFICIENT TO AUTHORIZE THE CREATION OF FEDERAL COMMON LAW (EXCEPT WHEN IT IS). Erie emphasized that “the vesting of jurisdiction in the federal courts does not in and of itself give rise to authority to formulate federal common law.” But where a jurisdictional grant would be rendered inoperative or unconstitutional absent FCL authority, the Court often finds FCL authority. Consider the Constitution’s grant of admiralty and interstate dispute jurisdiction, Sosa’s treatment of the Alien Tort Statute,¹ and Lincoln Mill’s treatment of the Taft-Hartley Act. The Court may be especially willing to find FCL authority from a jurisdictional grant where structural and purposive arguments suggest that reliance on state law for actions under the...

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