# Amicus Brief — Moody v. Meyers

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_1186%3A08

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Brief
- **Published:** January 1, 1983
- **Citation:** 464 U.S. 920

## Text

Ave i; -4
[CORRECTED COPY] / See re:
No. 82-2091 oa :
3,
IN THE :

Supreme Court of the United States

OCTOBER TERM, 1982

SHEARN Moopy, JR.,
Petitioner,
¥.

DAVID C. MEYERS, et al.,
Respondents.

On Petition for Writ of Certiorari to the
United States Court of Appeals for the Fifth Circuit

BRIEF AMICI CURIAE OF THE STATE OF MISSOURI
AND THE STATE OF OKLAHOMA

JOHN ASHCROFT * MICHAEL C. TURPEN **
Attorney General of the Attorney General of the

State of Missouri State of Oklahoma
Post Office Box 899 JOHN D. ROTHMAN
Jefferson City, Missouri 65102 Assistant Attorney General of
(314) 751-3321 the State of Oklahoma

State Capitol Building, Room 112
Oklahoma City, Oklahoma 73105
(405) 521-3921

** Counsel of record,
August 19, 1983 State of Oklahoma

* Counsel of record,
State of Missouri

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON. D.C. 20001

TABLE OF CONTENTS

Page
Re ee RCE ii
BORED GE GUE CGING riccitcciccsinicreessccrcnnsteniecmncisnreciaianins 1
IN GE CO ID ccc ssictevercevvceretenniecconiniiins deintihiasbeadale 1
nn Gr eI 1s. .cteupeedineponiansineianoensaiedl 2

I. The holding of the court below was clearly con-
trary to the applicable state law ................--.......--- 3

II. The unconstitutionality of the court’s decision
to fashion a rule contrary to state law was not
mitigated by the court’s failure to announce its
rejection of the state law —...0...............cccceeseeeeeeeeee 6

III. Without Supreme Court review and reversal of
decisions creating federal common law, other
limitations on the federal judicial power will
CR CEES ES PaO Toe BALI OE 12

Se PETIIUN sisccissdtinencrreieitinemnenainnsamtenneinnnamnin 17

il

TABLE OF AUTHORITIES

Cases Page
Arkansas Louisiana Gas Co. v. Texarkana, 97 F.2d

Ff | Rn noe rs 14
Baltimore & Ohio R.R. v. Baugh, 149 U.S. 368

CIE ccvedscecscensdekestitaatdemlensoubemateie nates 10, 11
Black & White Taxicab Co. v. Brown & Yellow

Taxicab Co., 276 U.S. 518 (1928) ...............0........ 9,10
Bolton v. Coats, 514 S.W.2d 482 (Tex. Civ. App.

ER ihe reagan -ioaadete sie aaaieetaie unanaad ane tomaa 5
Clearfield Trust Co. v. United States, 318 U.S. 363

PAINE <ocecccastescidiicessuatiesicicdctsieskainindensenaohcdianlaeaaamaae ena 9
Equitable Life Insurance Co. v. Halsey, 112 F.2d

SE CIID cvicsssisteewcrcunianssecsskibaceapecantaiddsialsaa as 14
Equitable Life Insurance Co. v. Halsey, 312 U.S.

S| | | ae cements sorerem WAP ARR Oe es 2 14
Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).. 2, 6,8
F.E.R.C. v. Mississippi, 456 U.S. 742 (1982) .......... 11
Fitzgerald v. United States Lines, 374 U.S. 16

CDP. ccocunoniesdevaisnisabvcimccdinnideeaniaamenaaaaaanaes 9
Guaranty Trust Co. of New York v. York, 326 U.S.

DP. CID vedicovisdun:stesianekedantecdeemueesmenamiadianaeneten 8

Guardians Association v. Civil Service Commission
of the City of New York, 51 U.S.L.W. 5105 (No.

81-431, decided July 1, 1983) 0.00.0... cee 12, 13
Gutierrez v. Collins, 583 S.W.2d 312 (Tex. 1979).. 3
Huntsville v. Goodenrath, 68 So. 676 (Ala. 1915).... 5
Illinois v. Milwaukee, 406 U.S. 91 (1972) .............. 9
Kirby Lumber Co. v. Adams, 62 S.W.2d 366

CIID - seiessccsiscnssemstocnunmesonieciasaamin cua iain 5
Lochner v. New York, 198 U.S. 45 (1905) —..0.00...... 15
Milwaukee v. Illinois, 451 U.S. 304 (1981) ..00000....... 13
Parratt v. Taylor, 451 U.S. 527 (1981) .......0.000000..... 12, 15
Paul v. Davis, 424 U.S. 698 (1976) .......................... 13
Pennhurst State School v. Halderman, 451 U.S.

GE Cosiscattasehic cab pnidaocacesbesenadem ated 12
Railroad Commission v. Marathon Oil Co., 89

S.W.2d 517 (Tex. Civ. App. 1935) 2.000.000.2000... 5

Railroad Commission v. McKnight, 619 S.W.2d
SOG CHO, TOR: F. BINED. eicctintatensendeiicntadsnaeenieees 5

iii

TABLE OF AUTHORITIES—Continued

Page
Southern Pacific R.R. Co. v. Jensen, 244 U.S, 205
aA Piecorasereusseanen ren er mrcen nee Mri 9
State v. Brooks, 53 So. 2d 329 (Ala, 1951) ~............. 5
Swift v. Tyson, 16 Pet. (41 U.S.) 1 (1842) —.......... 9
Texarkana v. Arkansas Louisiana Gas Co., 306
Sn iain 14
Texas Industries, Inc. v. Radcliff Materials, Inc.,
ee ee 0 I i crieeeeeemnieoannan 9
Vandenmark v. Owens-Illinois Glass Co., 311 U.S.
al slrasamennenl 3, 7, 14
West v. American Telephone and Telegraph Co.,
I SU corceienioeinaiet 14
Statutes and Miscellaneous Authorities
i ensnemmieieiieniet 12
Alabama Code § 27-2-21 (1975) .2.............cccceeceeeeeeee 5
Alabama Code § 27-2-31(a) (1975) ...................2.-.-.- 4
Alabama Code § 27-2-32 (1975) .2.........22...:0-ceseeeeeeeees 5
Texas Ins. Code Ann. art. 1.15, § 4 (Vernon 1981).. 5
M. Horwitz, The Transformation of American Law
ASS SEER eae aetna ete 15
J. McClellan, Joseph Story and the American Con-
I i eeelieaadataeeaiad 10
C. Wright, Handbook on the Law of Federal Courts
al 2,15

Friendly, Jn Praise of Erie—And of the New Fed-
eral Common Law, 39 N.Y.U. L. Rev. 383
STRATE Ieee ee Me eee Res es 9
Kurland, Mr. Justice Frankfurter, the Supreme
Court and the Erie Doctrine in Diversity Cases,
ey ee ms I °C os cdot teemdibaincnieaniiiead 11

IN THE

Sipreme Court of the United States

OCTOBER TERM, 1982

No. 82-2091

SHEARN Moopy, JR.,

Petitioner,
v.

DAVID C. MEYERS, et al.,
Respondents.

On Petition for Writ of Certiorari to the
United States Court of Appeals for the Fifth Circuit

BRIEF AMICI CURIAE OF THE STATE OF MISSOURI
AND THE STATE OF OKLAHOMA

INTERESTS OF THE AMICI CURIAE
STATE OF MISSOURI AND
THE STATE OF OKLAHOMA

The States of Missouri and Oklahoma have a strong
interest in the integrity of the federal system ordained by
the United States Constitution, and particularly in pre-
venting federal courts from substituting themselves for
state lawmaking authorities in the exercise of lawmaking
power outside the scope of the powers which have been
delegated to the federal government by the Constitution,
and which Congress has chosen to exercise. The States of
Missouri and Oklahoma hope to persuade this Court to
review and reverse the holding of the court below in order
to reaffirm the constitutional limits on the powers of the
federal judiciary and the constitutional integrity of the
states as lawmaking bodies.

STATEMENT OF THE CASE

Amici hereby adopt by reference the Statement of the
Case contained in the Petition for Writ of Certiorari at
2-6.

2

SUMMARY OF ARGUMENT

The concept of federalism embodied in the United
States Constitution requires that the states retain not
only titular authority to make decisions on matters not
delegated to the central government, but also real power
to enforce such decisions. Accordingly, when a federal
court substitutes its own notions of sound policy for the
applicable positive law that has been enacted by a state
legislature or pronounced by a state court, the federal
court does more than violate a “technical doctrine of
procedure or jurisdiction.” Rather, the unwarranted cre-
ation of “general federal common law” strikes at “the
heart of the relations between the federal government and
the states... .” C. WRIGHT, HANDBOOK ON THE LAW
OF FEDERAL CourRTs § 55 at 255 (3d ed. 1976); see Erie
Railroad Co. v. Tompkins, 304 U.S. 64 (1938).

In this case the Court of Appeals did not simply err
in an attempt to apply state law. Rather, it made no
attempt to determine what state law provided on the
pivotal question in the case. The court brushed aside
specific contentions about the statute and decisional law
of Texas and Alabama with a single reference to an as-
serted general principle of law. This principle, however,
had been repeatedly rejected by the state courts and state
legislatures whose decisions the federal court was bound
to apply.

The only remedy for the creation of general common
law by a federal court in an area outside the authority
of the federal government is review and reversal by this
Court. In several recent decisions, this Court has re-
minded lower federal courts that not even the most
broadly worded of federal statutes and constitutional pro-
visions are to be construed so as to transform federal
courts into courts of general common law. These admoni-
tions will prove to be pointless if federal judges are free
to reach whatever results they desire, without fear of
Supreme Court review, simply by resorting to the rubric
of “interpretation” of state rather than federal law. This

3

Court should therefore grant certiorari in this case in
order to make it clear that Erie requires a sincere and
thorough effort to discern and apply state law in pendent
and diversity cases, even where the positive law of the
state contravenes general principles in which the federal
judge strongly believes.

IL The holding of the court below was clearly contrary
to the applicable state law.

The Court of Appeals held that “there was only one
wrong complained of and proved: the manipulation of
the life interest leading to fatal undercapitalized acquisi-
tion.” Pet. App. 27 (emphasis supplied). This “manipu-
lation” was held to consist in the petitioner’s requesting
the Alabama Insurance Commissioner to revalue a life
interest owned by the corporation, and his subsequent
actions as an officer and director of the corporation in
undertaking acquisitions “based on an artificial surplus
created by the $14,403,200 revaluation of the life inter-
est.” Pet. App. 21. Petitioner contended in the proceeding
below, however, that under the applicable law’ the In-

1The Court of Appeals seems to have assumed that Texas sub-
stantive law applied to most issues in the case. Acknowledging
that it was required to follow Texas conflict of laws principles,
Opinion at 1458, the court did not in fact inquire into the con-
flict of law rule that Texas would have applied, but simply applied
Texas law (except on the decisive issue in the case, where it neither
cited any state law nor alluded to the absence of state authorities—
see text at pages 2-5, infra). In fact, the opinion in Gutierrez v.
Collins, 583 S.W.2d 312 (Tex. 1979), suggests that a Texas state
court would have applied Alabama substantive law. Gutierrez was
decided while the appeal in this case was pending, but it should have
been followed by the Court of Appeals. See Vandenmark v. Owens-
Illinois Glass Co., 311 U.S. 588 (1941). The Court’s failure to
apply Alabama law would only be relevant if the substantive law of
‘'exas was different from that of Alabama. In fact, had the Court
of Appeals consulted either Texas or Alabama law on the question
whether a state administrative decision can be collaterally attacked
in a private suit for damages, it would have been forced to decide
for petitioner rather than for respondents. See text as pages 2-5,

infra.

+

surance Commissioner’s ruling on the value of the life
interest was not subject to collateral attack in an action
for damages. If petitioner had prevailed on this point—
i.e., if the courts below had regarded themselves as bound
by the administrative ruling that the life interest was
worth $14 million—then petitioner could not have been
held “grossly negligent” for acting in accordance with
the Commissioners’ finding and not with some other and
perhaps better evaluation of what the life interest was
worth.’

In rejecting petitioner’s argument against collateral
attack on the Commissioner’s ruling, the Court of Appeals
cited no authority and only the following analysis:

This contention is spurious. An insurance company
may not delegate responsibility for valuation of its
assets to a state agency, and the mere fact that an
insurance commissioner accepts a company’s asset
valuation does not immunize the company from li-
ability arising from that valuation.

Pet. App. 22 n.11. This rule, on which the whole case
turned, is directly contrary to the rule that would have
been applied if the case had been tried in a state court.

The acts of the Alabama Insurance Commissioner are
expressly made “quasi-judicial” by statute. Ala. Code
§ 27-2-31(a) (1975). The Commissioner’s statutory duty

2 The court below also stated that the Commissioner “might”
have been “swayed by considerations of friendship and obligation
in approving the increased valuation of the life interest,” Pet. App.
8 n.4, and that during an earlier proceeding than the one on which
petitioner’s liability was based, petitioner has “failed to disclose his
belief that the trust interest was intended to be non-transferable.”
Pet. App. 26. Neither of these statements, however, was any part of
the court’s holding, since neither was found to have contributed
to “the one wrong complained of and proved.” Pet. App. 27. If the
court below had regarded itself as bound by the Commissioner’s
finding that the life interest was worth $14 million, neither of these
allegations could have created liability on the part of the petitioner,
since all damage and all liability in the case were found to have
resulted from the life interest being worth less than the Commis-
sioner had found it to be worth.

5

includes a duty to make an independent appraisal of the
value of the corporation’s reserve assets. Jd. § 27-2-21.
This appraisal was made in writing after a hearing at
which documentary and testimonial evidence was ad-
duced. Pet. App. 7-8; DX 6. The statute provides an
exclusive method for direct attack on rulings of the
Commissioner, which must be brought in the circuit court
of Montgomery County, Alabama. Ala. Code § 27-2-32
(1975). Similarly, in Texas (the forum state in the pro-
ceedings below, whose law the Court of Appeals applied
on other questions and presumably would have applied
to this question had it designed to apply state law at all),
a direct attack on any “rule, regulation, order, decision
or finding” of the State Board of Insurance is subject to
review by suit filed in the state district court in Travis
County, Texas, “and not elsewhere.” Tex. Ins. Code Ann.
art. 1.15, §4 (Vernon 1981). Collateral attacks on
agency determinations in private suits for damages are
forbidden. Railroad Commission v. McKnight, 619 S.W.2d
255 (Tex. Civ. App. 1981); Bolton v. Coats, 514 S.W.2d
482 (Tex. Civ. App. 1974); Railroad Commission v.
Marathon Oil Co., 89 S.W.2d 517 (Tex. Civ. App. 1935) ;
Kirby Lumber Co. v. Adams, 62 S.W.2d 366 (1933).
Accord, State v. Brooks, 53 So. 2d 329 (Ala. 1951);
Huntsville v. Goodenrath, 68 So. 676 (Ala. 1915). This
rule flows from the quasi-judicial nature of administra-
tive agency determinations and from the need for cer-
tainty in business transactions; it does not depend on the
soundness of the business judgment, or even on the “good
faith,” of parties who have treated the administrative
finding as though it were true rather than false. Thus, for
example, an allegation that a defendant in an action for
damages procured an administrative finding by making
false statements to the tribunal was insufficient to allow
the plaintiff to controvert the finding. Bolton v. Coats,
supra, 514 S.W.2d at 487. These holdings are incompatible
with the rule fashioned by the Court of Appeals in this
case to the effect that a state may not “delegate” respon-
sibility for evaluating its assets to a state agency, since

6

the sole effect of this ‘“non-delegation doctrine’ was to
allow the evaluation to be controverted in a collateral
action for damages.

II. The unconstitutionality of the court’s decision to
fashion a rule contrary to state law was not mitigated
by the court’s failure to announce its rejection of the
state law.

Since Erie Railroal Company v. Tompkins, 304 U.S.
64 (1938), this Court has recognized that when a federal
court substitutes rules of its own choosing for the statute
or decisional law of a State whose sovereignty includes
the power to make the law, the court violates the
Constitution.

The decision of the court below to create “federal com-
mon law” rather than to follow the applicable state law
was obfuscated by the court’s failure to identify the
source of the rule on which it resolved the case. While the
court did not attempt to show that its “non-delegation”
rule was derived from, or even consistent with, the law
of Texas or Alabama, it also refrained from announcing
that it was applying or creating federal common law.
This does not change the nature of the decision. If the
Court of Appeals had dealt thoroughly and candidly with
the Texas and Alabama statutes and decisions, and then
rejected them as “spurious” because they conflicted with
a general overarching rule of law to the effect that com-
panies may not “delegate” fact-finding responsibility to
state agencies, there would have been no doubt of the
court’s violation of the Constitution as construed by the
Court in Erie. Surely there can be no constitutional dif-
ference between a candid disavowal of applicable state
authorities and a rejection sub silentio of the same au-
thorities for the same purpose and to the same effect.

In a sense, federal courts create general federal com-
mon law whenever they make incorrect guesses about how
state supreme courts would decide the questions of state
law with which they are presented. See, e.g., Vanden-

7

mark v. Owens-Illinois Glass Co., 311 U.S. 588 (1941).
It would be neither possible nor desirable, however, for
this Court to grant certiorari in order to consider every
allegation that a federal court had simply misconstrued
state law. What distinguishes this case—what makes it
at least as destructive of the constitutional principle of
federalism as a candid usurpation of state lawmaking
power would have been—is that the court below made no
attempt to apply state law to the question on which the
case turned. If there had been no state statutes or deci-
sions to be found, moreover, the court’s failure to allude
to its duty to apply state law would be no more than evi-
dence of an unhealthy tendency to forget the role of the
federal courts within the federal system; but in this case
the court ignored state statutes and decisions that clearly
contradicted its holding. Finally, in this case the way in
which the court contrived to ignore state law—by reject-
ing a litigant’s references to the enacted and decisional
law of a state as “spurious” on the ground that they con-
flict with a general statement apparently derived from
the court’s apprehension of “the” law—is the very mode
of judicial decisionmaking that Erie forbade.

When these three factors are present in a diversity or
pendent jurisdiction * case—failure to cite state law or
to allude to the absence of state authorities, a decision
that clearly contravenes state law, and an apparent res-
olution of the state law question by reference to an as-
serted general principle of law—the decision partakes of
all the evils that are characteristic of “federal general
common law,” whether or not the decision describes itself
as a federal common law decision. Decisions such as the
one rendered by the court below meet all the criteria by

3 The court below did not find it necessary to determine whether
its authority to decide state law questions was based on diversity
jurisdiction or on pendent jurisdiction. In either case a federal
court’s obligation is to follow the decisions of the state courts.

8

which impermissible federai common lawmaking is com-
monly characterized:

1) When different rules are applied in state and fed-
eral courts respectively—regardless of whether the fed-
eral courts admit they are applying different rules, and
assuming only the “[p]Jersistence of state courts in their
own opinions on questions of common law,” Erie, supra,
304 U.S. at 74—there will be a lack of uniformity in the
law and a corresponding uncertainty surrounding com-
mercial transactions.

2) Similarly, although diversity jurisdiction “was con-
ferred in order to prevent apprehended discrimination in
state courts against those not citizens of the State,” ap-
plication of different substantive rules in federal courts
introduces “grave discrimination by non-citizens against
citizens” by making “rights enjoyed under the unwritten
‘general law’ vary according to whether enforcement [is]
sought in the state or federal court,” and giving the
power of selecting the forum (and hence the law) to the
non-citizen. Jd. at 74-75.

3) Whether an error results from a wilful rejection of
the court’s duty to apply state law or from a sub silentio
rejection of state law in favor of an asserted general
principle has no bearing on whether the error is “out-
come-determinative.” See Guaranty Trust Company of
New York v. York, 326 U.S. 99 (1945). In this case the
result reached by the courts below could not have been
reached if the courts had followed the Texas and Alabama
rule against collateral attacks on administrative rulings
in private suits for damages, rather than the contradic-
tory general principle formulated by the Courts of Ap-
peals. See pages 2-5, supra.

4) Nor is this issue within one of the “narrow areas”
in which the federal courts are “free to develop a common
law” absent a delegation from Congress pursuant to a
constitutional grant of federal power. These areas include

9

“those concerned with the rights and obligations of the
United States, interstate and international disputes im-
plicating the conflicting rights of States or our relations
with foreign nations, and admiralty cases.” Texas Indus-
tries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 641
(1981) (footnotes omitted). See generally Clearfield
Trust Co. v. United States, 318 U.S. 363 (1943) ; Illinois
v. Milwaukee, 406 U.S. 91 (1972); Fitzgerald v. United
States Lines, 374 U.S. 16 (1963). One danger flowing
from an attitude among federal judges that they ought
to formulate general principles of law to govern disputes
between private parties outside these specialized areas is
that the federal courts will then pay insufficient attention
to the development of guidelines to determine when it is
appropriate to apply or create federal common law. See
Friendly, In Praise of Erie—And of the New Federal
Common Law, 39 N.Y.U. L. Rev. 383 (1964). This dan-
ger is aggravated rather than alleviated when a federal
court creates federal common law without acknowledging
(and perhaps even without quite knowing) that it is
doing so.

5) The outstanding characteristic of the general federal
common law prior to Erie was the theoretical premise
from which it proceeded: that there is “a transcendental
body of law outside of any particular state but obligatory
within it unless and until changed by statute.” Black and
White Taxicab Company v. Brown and Yellow Taxicab
Company, 276 U.S. 518, 533 (1928) (Holmes, J., dissent-
ing). In Swift v. Tyson, 16 Pet. (41 U.S.) 1 (1842), for
instance, the Court found it “necessary ... to express
our own opinion of the true result of the commercial law
upon the question now before us,” notwithstanding the
New York decisions that had already addressed the ques-
tion. Jd. at 19. The more firmly the judges became con-
vinced that the commercial Jaw was an objectively ascer-
tainable set of principles (like “a brooding ominpresence
in the sky,” Southern Pacific Railroad Co. v. Jensen, 244
U.S. 205, 222 (1917) (Holmes, J.)), however, the more

10

likely it became that the “general law” would amount to
“little less than what the judge advancing the doctrine
thinks at the time should be the general law.” Baltimore
& Ohio R.R. v. Baugh, 149 U.S. 368, 401 (1893) (Field,
J., dissenting). This theoretical premise and this style of
decisionmaking were also the premise and the style of the
court below. The Court of Appeals did not find it neces-
sary to inquire into state law on the question because it
felt sure that petitioner’s argument was “spurious.” Pet.
App. 22 n.11. The argument was “spurious” because it
conflicted with a general principle in which the court
obviously believed quite strongly. See id. This approach to
decisionmaking is precisely the approach taken in Swift
and declared unconstitutional in Erie. The error of the
court below was to base the petitioner’s liability on a
principle imported from a source other than (and, as it
happens, hostile to) the statute and decisional law of
Texas and Alabama. “But there is no such body of law.
The fallacy and illusion . . . consist in supposing that
there is this outside thing to be found.” Black and White
Taxicab Co., supra, 276 U.S. at 533 (Holmes, J.,
dissenting) .*

* Justice Story’s belief that it was proper for federal judges to
create general common law was closely related to his belief that the
common law ought to embody the natural law. See J. MCCLELLAN,
JOSEPH STORY AND THE AMERICAN CONSTITUTION 180-83 (1971).
Conversely, Justice Holmes’s distaste for the “brooding omnipres-
ence” of federal common law was related to his rejection of the idea
of natural law. See id. at ix-x. Limitations on the lawmaking au-
thority of federal courts need not, however, be based on a rejection
of the idea of natural law, since a belief in natural law does not
entail the superior capacity or authority of federal judges as transla-
tors of natural law into positive law. Similarly, one who rejects the
idea of objective right and wrong might logically choose to be a
“federal judicial positivist” on the ground that he finds the rules
generally made by federal judges more useful than, or otherwise
preferable to, rules made by other lawgivers. For the purpose of
constitutional analysis, it is enough to observe that judicial decisions
are a kind of positive law, and that the Constitution reserves law-
making power to state governments wherever such power has not
been delegated to the federal government.

11

6) Application of any law other than that made by the
state having the sovereign power to make the law injures
not only one or more litigants, but also the state itself.
“Indeed, having the power to make decisions and to set
policy is what gives the State its sovereign nature.”
F.E.R.C. v. Mississippi, 456 U.S. 742, 761 (1982). There-
fore, “[n]othing can be more disturbing and irritating
to the states than an attempted enforcement upon its
people of a supposed unwritten law ... to which they
have never assented and which has no existence except in
the brain of the Federal judges in their conceptions of
what the law of the states should be on the subject con-
sidered. Baltimore & Ohio R.R. v. Baugh, 149 U.S. 368,
403 (1893) (Field, J., dissenting). Indeed, “sophisticated
students of government understand that these problems
involve fundamental questions of power, and that the ex-
istence of democracy depends in no small part upon the
proper allocation of such authority.” Kurland, Mr. Jus-
tice Frankfurter, the Supreme Court and the Erie Doc-
trine in Diversity Cases, 67 Yale L.J. 187, 187 (1957).

Although a candid refusal by a federal court to apply
state law might be worse than a more casual approach
such as that taken by the court below in that the former
would add insult to injury, it is also possible that a bold
usurpation is less dangerous than a quiet one in that it
would be more likely to alert Congress to the need for
remedial action. Concerning “fundamental questions of
power” on which “the existence of democracy depends,”
some of the most dangerous errors in history have been
made by those who proceeded quietly and with good inten-
tions. Unless mens rea is to be introduced as a necessary
element in establishing the unconstitutionality of federal
lawmaking outside the delegated powers of the federal
government, a federal court’s negligent failure to apply
applicable state law cannot be distinguished from a de-
liberate refusal to apply the same law under otherwise
identical circumstances.

12

III. Without Supreme Court review and reversal of deci-
sions creating general federal common law, other
limitations on the federal judicial power will prove
illusory.

Casual disregard of state authorities in the course of
“interpreting” state law is one of several ways in which
federal courts can exceed their constitutional authority
to make law. Several recent decisions of this Court have
had the effect of closing “loopholes” through which fed-
eral judges might have reached desired results at the ex-
pense of state sovereignty cr the separation of powers.
Unless the lower federal courts take seriously their re-
sponsibility to apply state law in diversity and pendent
jurisdiction cases, however, other limitations on the fed-
eral judicial power will have no practical effect.

One way in which the federal courts have made law is
by the “interpretation” of broadly-worded federal statutes
so as to confer unlimited discretion on federal judges to
make rules of law. In Parrat v. Taylor, 451 U.S. 527
(1981), this Court reversed a lower federal court’s in-
corporation of the principles that “no loss should go with-
out redress” into 42 U.S.C. § 1983. Significantly, the
Court cited Erie and observed that there is “no general
common law applicable to federal courts” as a basis for
deciding cases on the basis of “a single general principle,
however just that principle may be in the abstract.” Jd.
at 531-32.

Similarly, where the United States has to some extent
limited the decisionmaking authority of state govern-
ments by attaching conditions to federal grants, lower
federal courts have sometimes seemed to regard these
conditions as occasions for the wholesale extension into
new areas of federal judicial power to define individual
and governmental rights and responsibilities. This Court,
however, has rejected such a construction. Pennhurst
State School v. Halderman, 451 U.S. 1 (1981). See also
Guardians Association v. Civil Service Commission of the

13

City of New York, 51 U.S.L.W. 5105, 5109 (No. 81-431,
decided July 1, 1983): “Since the private cause of action
under Title VI [of the Civil Rights of 1964] is one im-
plied by the judiciary rather than expressly created by
Congress, we should . . . take care in defining the limits
of this cause of action and the remedies available there-
under... .”

Even where state sovereignty is perhaps at its lowest
ebb—where the Fourteenth Amendment to the Constitu-
tion requires the federal courts to review allegations that
the state has deprived an individual of life, liberty, or
property without due process of law—this Court has re-
jected attempts by lower federal courts to ignore the
specific purposes of the Fourteenth Amendment and to
construe it as “a font of tort law to be superimposed
upon whatever systems may already be administered by
the states.” Paul v. Davis, 424 U.S. 6938, 701 (1976).

Yet another way in which the federal courts might
tend to become courts of general common law is by ex-
panding the narrow scope of legitimate federal common
lawmaking power. This Court has, however, recognized
that it has a special responsibility to review such at-
tempts at expansion. Indeed, “[s]ince the states are
represented in Congress but not in the federal courts,
the very concerns about displacing state law which coun-
sel against finding pre-emption of state law in the absence
of clear intent actually suggest a willingness to find con-
gressional displacement of federal common law” by sub-
sequent federal legislation. Milwaukee v. Illinois, 451 U.S.
304, 317 n.9 (1981).

In each of the types of cases discussed above, this Court
reminded lower federal courts that the limitations on
their lawmaking power are substantive as well as formal.
It is not enough for a federal judge simply to make a
ritual bow toward some source of authority—whether it
be the Fourteenth Amendment, a federal] statute, or the
legitimate federal common law—and then to reach what-
ever result he desires in the case before him. When the

14

judge treats state law as little more than a base that
must be touched prior to going about the business of
judicial lawmaking, he achieves the same result as he
would have done by using any of these devices the Court
has so recently forbidden, and with even less constitu-
tional justification.®

5 During the first few years after the decision in Erie, this Court
reviewed a number of lower federal court decisions to determine
whether they had correctly applied state law in diversity cases.
Most of these were cases in which the lower federal courts had
announced that they would follow some state authorities but not
others. See, e.g., West v. American Telephone and Telegraph Co.,
311 U.S. 223 (1940) (federal courts must follow state intermediate
appellate court decisions unless convinced that the state’s highest
court would decide otherwise) ; Vandenmark v. Owens-Illinois Glass
Co., 311 U.S. 538 (1941) (federal Court of Appeals may not dis-
regard state court decisions rendered after the date of the federal
district court judgment being appealed). Two of the lower federal
court decisions reviewed and reversed by this Court, however,
were strikingly similar to the decision of the Court of Appeals in
this case. In Texarkana v. Arkansas Louisiana Gas Co., 306 U.S.
188 (1939), and Equitable Life Insurance Co. v. Halsey, 312 U.S.
410 (1941), the courts of appeals had acknowledged their respon-
sibility to apply state law but had in fact decided the principal
issues without referring to applicable state court decisions. See
Arkansas Louisiana Gas Co. v. Texarkana, 97 F.2d 5 (5th Cir.
1938) ; Equitable Life Insurance Co. v. Halsey, 112 F.2d 302 (1940).
In the Texarkana case the Court of Appeals declared, “We think
the appellant has the right of it throughout,” because it was ‘“‘per-
fectly plain” that a certain contract clause was “completely invalid
and unenforceable as an attempt to abdicate and delegate” a legal
duty. 97 F.2d at 9. The Supreme Court, however, granted certiorari
“on account of asserted conflict with the decisions of the state
courts,” 306 U.S. at 191, and reversed. 306 U.S. at 201-02. Similarly,
the Court of Appeals in the Equitable Life case declared, “We see
no reason why appellant should be held accountable,” since a certain
clause in a contract “constituted a valid defense.” The Supreme
Court of lowa, however, had concluded otherwise, and so the United
States Supreme Court reversed. 312 U.S. at 423-26. The effect of
this Court’s decisions in Terarkana and Equitable Life was to re-
mind the lower federal courts that they have an affirmative duty
to apply state law, not merely to say they are applying it. The
decision of the Court of Appeals in this case suggests that some
federal judges need to be reminded again.

15

The decision of the court below, like the lower federal
court decision that this Court reversed in Pariatt, was
a result of the same phenomenon that gave rise to Swift
v. Tyson: excessive self-confidence on the part of some
federal judges who feel they can provide “juster justice”
than that which is embodied in the laws that state legis-
lators and state judges have made. Cf. C. WRIGHT, supra,
$56 at 262. The “general commercial law” whose dis-
covery was announced in Swift has been attributed to
a desire on the part of certain federal judges “to estab-
lish a maier procommercial legal doctrine that had con-
sistently been opposed at the state level” and eventually
“to take [commercial] disputes out of what might other-
wise be an uncongenia!l anticommercial environment
often found in state courts.” M. Horwitz, THE TRANS-
FORMATION OF AMERICAN LAW 1780-1860 at 223, 252
(1977). Evie came at a time when this Court was re-
versing vet another wave of federal “judicial activism,”
in which judges had enforced their own social and eco-
nomic philosophies under the pretext of finding the com-
mon law or internreting the Constitution. See, e.q., Loch-
ney v. New York, 198 U.S. 45 (1905). Recent decisions
of this Court, such as Parratt v. Taylor, supra, are de-
signed to curtail the latest resurgence of federal judicial
activism—of which the decision of the court below is an
outstanding example. Although the economic and social
philosophy heing imposed by some judges today, unlike
the prevailing judicial philosophy during the Swift and
Lochner eras, can hardly be called “procommercial,” the
threat to constitutional! federalism and to government by
the consent of the governed is identical.

This case is a perfect illustration of the point that this
Court must police the frontiers of all doctrines limiting
federal judicial lawmaking power in order for any of
these limitations to be meaningful. If the court below had
construed federal securities laws to impose personal lia-
bility on an insurance company officer for treating a cor-

Ee A A a A

16

porate asset as though it were worth what the state
insurance commissioner said it was worth, the holding
would have been quite controversial and would have
merited review by this Court. If, on the other hand, a
state court had been presented with the question of how
the state law ought to be construed, it would have
reached the opposite result. See pages 2-5, supra, and au-
thorities cited therein. It would be ironic indeed if the
decision below should escape review because it “merely”
involves a federal court misconstruing state law. In
which direction a lower federal court bows prior to creat-
ing federal common law-—whether to the Fourteenth
Amendment, to § 1983, to “the general commercial law,”
or to a “diversity jurisprudence” in which state statutes
and state court opinions are overridden by axioms—
makes no practical difference. None of these disguises
should enable an unconstitutional exercise of federal
judicial lawmaking to evade Supreme Court review.

CONCLUSION

For the reasons hereinabove stated, this Court should
grant the petition for certiorari.

Respectfully submitted,

JOHN ASHCROFT * MICHAEL C. TURPEN **

Attorney General of the Attorney General of the
State of Missouri State of Oklahoma

Post Office Box 899 JOHN D. ROTHMAN

Jefferson City, Missouri 65102 Assistant Attorney General of

(314) 751-3321 the State of Oklahoma

* oll wane State Capitol Building, Room 112
— pe — Oklahoma City, Oklahoma 73105

(405) 521-3921

** Counsel of record,
August 19, 1983 State of Oklahoma

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_1186%3A08. Public record. Not legal advice.