P filed a diversity suit against D claiming breach of fiduciary duty (state based cause of action).
District court dismissed the suit on D's motion for summary judgment saying there was no trust relationship.
COA reversed saying that there was a trust relationship. COA also said that on remand the trial court was not bound by the otherwise applicable state statute of limitations, which seemed to bar the suit. Instead, they district court was free to rely on the equitable doctrine of "laches" as developed by federal decisional law.
The doctrine of laches gives a federal court broad discretion to determine whether a case has been timely filed.
Procedural History:
COA said trial court could use federal doctrinal law of laches instead of state statute of limitations law.
SCOTUS reversed, state statute of limitations law applies over federal doctrinal law of laches.
Issues:
What analysis should a federal court sitting in diversity apply in deciding whether to use federal doctrinal law over state statutes?
Holding/Rule:
A federal court sitting in diversity should not apply any federal doctrinal law that would cause a different outcome if used over a state statute.
Reasoning:
It is immaterial whether statutes of limitation are characterized either as substantive or procedural.
The intent of Erie was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a state court.
A statute that would completely bar recovery in a suit if brought in a state court bears on a state-created right vitally and not merely formally or negligibly.
