Erie Railroad v. Tompkins, 304 US 64 (1938)

Part Nine of the British System

In its decision of the case of Erie R. R. v. Tompkins, in 1938, the Supreme Court overturned the Swift v. Tyson decision of 1842 by stating: In the Erie case, Justice Brandeis wrote: "Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the State . . . There is no Federal General Common Law." Note the exception. The court has excepted matters governed by the constitution and acts of Congress from being governed by State law. Henry J. Friendly, Judge, United States Court of Appeals for the Second Circuit subsequently gave us the following insights into the significance of this decision:

"The clarion yet careful pronouncement of Erie, `There is no Federal General Common Law' opened the way to what, for want of a better term, we may call Specialized Federal Common Law. I doubt that we sufficiently realize how far this development has gone -- let alone where is likely to go." "Since most cases relating to Federal matters were in the Federal courts and involved `general' law, the familiar rule of Swift v. Tyson usually gave Federal judges all the freedom they required in pre-Erie days and made it unnecessary for them to consider a more Esoteric source of power . . . By focusing attention on the nature of the right being enforced, Erie caused the principle of a specialized Federal Common Law, binding in all courts because of its source, to develop within a quarter century into a powerful unifying force.

Just as Federal courts do not conform to State decisions on issues property for the States, State courts must conform to federal decisions in areas where Congress, acting within powers granted to it, has manifested, be it ever so lightly, an intention to that end. "The Lincoln Mills doctrine (353 US 448 (1957) is pregnant with possibilities. If the grant of Federal jurisdiction in suits on labor contracts affecting commerce was a mandate to fashion a Federal Common Law consistent with federal labor legislation . . . this like the Federal Common Law of labor would have supremacy over State law."

"The Federal giant" . . . ;`Professor Gilmore' has written: "is just beginning to stir with his long-delayed entrance we are, it may be, at last catching sight of the principle character."

QUESTION: (1). What, do you suppose, is the nature of the right, and what is the source Judge Friendly is referring to, that caused the Erie Court to overturn the Swift v. Tyson decision and rule that there was no longer a General Federal Common Law?

(2). Who, or what, is the "principle character" that Judge Friendly, [or Professor Gilmore, whom he quotes] refers?

Remember, Justice Story said in the DeLovio case that the jurisdiction of Admiralty, as to contracts, depends upon the subject matter and the nature of the cause! In a book entitled "The Law of Bills, Notes, and Cheques", Melville M. Bigalow, Ph. D. Harvard, said in the year 1900: "We are concerned in this book with a branch which deals with the law of bills, notes and cheques. This branch of the law merchant has retained throughout its life, to the present day, its essential characteristics, clearly marking it off from the Common Law . . . The term Law Merchant at the present time usually suggests the law of bills, notes and cheques. The time came when it must take its place, even if piecemeal by the side of the Common Law, and of Admiralty and Equity, in the jurisprudence of England. Admiralty had already been exercising jurisdiction over instruments in the nature of bills of exchange and promissory notes pertaining to contracts in the commerce of the high seas. The Law Merchant is not even a modification of the Common Law; it occupies a field over which the Common Law does not and never did extend."

And, from the "Handbook of the Law of Federal Courts": . . . a unanimous Court (Clearfield Trust co. v. United States, 1943, 63 S. Ct. 573) held: "The rights and duties of the United States on commercial paper that is of issue are governed by Federal rather than local law. This does not mean that in choosing the applicable Federal rule the courts may not occasionally select State law. But it was thought that such a course would be singularly inappropriate in the Clearfield case. The issuance of commercial paper by the United States is on a vast scale and transactions in that paper from issuance to payment will commonly occur in several States . . . The desirability of a uniform rule is plain.

To find such a uniform rule the Court looked to the Federal Law Merchant . . ." "Federal courts have made similar decisions for themselves as to what the controlling rule is to be in other cases where the United States is a party issued by the United States," government contracts, or the effect of a Federal lien . . ." "If an issue is controlled by Federal Common Law, this is binding on both State and Federal courts. A case `arising under' Federal Common Law is a Federal question case, and is within the original jurisdiction of the Federal courts as such . . ." The burgeoning of a Federal Common Law binding on Federal and State courts alike has occurred at the same time as the development of the Erie doctrine . . .

It is frequently said that the Erie doctrine applies only in cases in which jurisdiction is based on diversity of citizenship. Indeed in an action for wrongful death caused by a maritime tort committed on navigable waters, the Court curtly dismissed Erie as "irrelevant," since the district court was exercising its admiralty jurisdiction, even though it was enforcing a state-created right". . .

. . Despite repeated statements implying the contrary, it is the source of the right sued upon, and not the ground on which federal jurisdiction is founded, which determines the governing law." Obviously, the principle character Judge Friendly was referring to is the Admiral himself -- enlarging his powers and jurisdiction as a result of the "public policy" of HJR-192 -- that being perpetual debt and limited liability for payment of debt under the Federal Law Merchant and the Law of Admiralty because of subject matter and nature of the cause. Victory Tax Act (1942)

Prior to the Erie decision, it was well established by many court decisions that wages were not income within the meaning of the 16th Amendment. The Victory Tax Act was passed by congress in 1942, as an emergency war measure, authorizing income tax on wages. This act was to self-destruct, and did, two years from its enactment.

QUESTION: It is common knowledge that "income taxes" on labor have continued to be collected since the expiration of the Victory Tax Act in 1944. What is the legal basis for a so-called "income tax" on wages since 1944? The facts clearly show that it is not an income tax on wages, but, instead is an interest or premium payment to the maritime lender, the Federal Reserve. The 16th Amendment does not apply to the Feds in this case -- Just as Article I, Section 10, Clause 1, does not apply to the States! United States v. South-Eastern Underwriters Association, 322 US 533, (1944).

In 1944 the US Supreme Court decided the case of US v. S.E. Underwriters Association holding insurance to be inter-state commerce. FIRST NAT. EEN. SOC. V. GARRISON INSURANCE (1945): "The District Court takes judicial notice that, under a recent decision of the Supreme Court, insurance is now interstate commerce within the commerce clause." McCarren Act (1945).

In 1945, Congress enacted the McCarren Act declaring "that the continued regulation and taxation by the several States of the business of insurance is in the public interest and that silence on the part of congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States."

Beginning in 1963, the words "redeemable in lawful money" and "will pay to the bearer on demand" were removed from future issues of Federal Reserve Notes: further reflecting the public policy stated in HJR-192. And, strangely enough, on October 28, 1977, HJR-192 was quietly repealed by public law 95-147. The joint resolution entitled "Joint resolution to assure uniform value to the coins and currencies of the United States" approved June 5, 1933 (31 U.S.C. 463), shall not apply to obligations issued on or after the date of enactment of this section.

The reason for the repeal of HJR-192 is somewhat obscure. After 44 years of unchallenged implementation, this public policy is clearly established by custom, usage and participation in the credit system by the American public. Those of us operating on the privilege of limited liability, via the public credit, are still bound by the rules of the giver of the privilege. cmlaw9.htm

Proceed To PART TEN