Fidelity Union Trust Co. v. Field

Supreme Court of the United States
1940 U.S. LEXIS 39, 311 U.S. 169, 61 S. Ct. 176 (1940)

ELI5:

Rule of Law:

In diversity jurisdiction cases, federal courts are bound to follow the decisions of a state's intermediate appellate courts on matters of state law in the absence of a contrary decision by the state's highest court.

Facts:

In 1935, Edith M. Peck retitled her savings bank account to read 'Edith M. Peck, in trust for Ethel Adelaide Field.'
Peck retained exclusive control over the account, with the sole right of withdrawal and the right to revoke the trust.
Peck gave no further notice of the existence of the trust to Field or anyone else.
After Peck's death, Ethel Adelaide Field claimed the money in the account belonged to her, while Peck's executors claimed it for the estate.

Procedural Posture:

Ethel Adelaide Field sued the executors of Edith M. Peck's estate in the U.S. District Court for the District of New Jersey (trial court) to claim the balance of a bank account.
The District Court ruled in favor of the executors, finding that no valid trust existed under New Jersey law.
Field, as the appellant, appealed the decision to the U.S. Circuit Court of Appeals for the Third Circuit.
The Circuit Court of Appeals reversed the District Court's judgment, holding that a state statute entitled Field to the funds and declining to follow contrary decisions from the New Jersey Court of Chancery.
The executors, as petitioners, were granted a writ of certiorari by the U.S. Supreme Court.

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Issue:

In a diversity case, must a federal court follow the decision of an intermediate state court on a matter of state law when the state's highest court has not yet ruled on the issue?

Opinions:

Majority - Chief Justice Hughes

Yes, a federal court must follow the decisions of an intermediate state court on matters of state law when the state's highest court has not spoken. The principle established in Erie Railroad Co. v. Tompkins requires federal courts to ascertain and apply state law, and the decisions of intermediate state courts are an authoritative expression of that law. An intermediate state court, in declaring and applying state law, acts as an organ of the state, and its determination should be followed by a federal court unless there is more convincing evidence of what the state law is. To allow a federal court to disregard such decisions would create a different rule of law for litigants in federal court than for those in state court on the same issue, which is an inadmissible outcome under the Erie doctrine. Therefore, the Circuit Court of Appeals erred by rejecting the New Jersey Chancery Court decisions merely because it disagreed with their reasoning.

Analysis:

This case significantly clarifies and extends the Erie doctrine, which mandates that federal courts in diversity cases apply state substantive law. Fidelity Union Trust Co. v. Field establishes that 'state law' includes not only statutes and decisions from the state's highest court but also authoritative rulings from its intermediate appellate courts. This holding reinforces the principles of federalism by respecting the role of state courts as the primary interpreters of their own laws. It also serves to prevent forum shopping by ensuring that the outcome of a case involving state law will be the same whether it is tried in a state or federal court.

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