304 U.S. 64 (1938)
The case of Erie R.R. Co.
Should federal courts apply federal common law or state substantive law in cases where they exercise diversity jurisdiction?
Federal courts must apply state substantive law in diversity cases, as there is no general federal common law.
The Supreme Court held that federal courts must adhere to state substantive laws when deciding cases under diversity jurisdiction, effectively abolishing the practice of federal courts applying their own judge-made law in these instances.
Erie R.R. Co. v. Tompkins is a cornerstone of American jurisprudence, shaping the interaction between state and federal laws. It curbed federal judicial activism, reduced the forum-shopping that arose from divergent laws, and clarified the procedural versus substantive distinction in law. For law students, it underscores the importance of jurisdictional doctrines and federalism, illustrating how courts balance local and federal interests.