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SWIFT v. TYSON 41 U.S. (16 Peters) 1 (1842)

In Swift v. Tyson the Supreme Court gave to the Rules of Decision Act (JUDICIARY ACT OF 1789, section 34) a construction that was to stand until ERIE RAILROAD CO. V. TOMPKINS (1938), almost a century later. As a result of this construction, the federal courts came to exercise COMMON LAW authority over a wide variety of disputes, some of which involved matters outside the limits of federal legislative power. Because these federal court decisions did not purport to bind state courts, the result was often the parallel existence of two different rules of law applicable to the same controversy.

Proceeding on the basis of diversity of citizenship (see DIVERSITY JURISDICTION), Swift sued Tyson in a New York federal court on a bill of exchange. A critical question in the case was whether, in light of the particular facts, Swift was a "purchaser for value" of that bill. The Supreme Court, in an opinion by Justice JOSEPH STORY, held that he was, resolving the question on the basis of "general principles and doctrines of commercial jurisprudence," not on the basis of the decisional law of New York.

Tyson had argued that although there was no relevant state statute, the decisions of the New York state courts were controlling because the Rules of Decision Act provided that the "laws of the several states … shall be regarded as rules of decision …in cases where they apply." This provision, the Court replied, was limited in application to "the positive statutes of the state, and the construction thereof by the local tribunals, and to rights and titles to things having a permanent locality." It did not require adherence to state judicial decisions on such matters as "questions of general commercial law, where the state tribunals are called upon to perform the like functions as ourselves, that is, to ascertain, upon general reasoning and legal analogies … what is the just rule furnished by the principles of commercial law to govern the case."

Historians disagree on the justification and soundness of the Swift decision. But there is general agreement that in the years that followed, Swift was expanded well beyond its originally intended scope, and that its OVERRULING, in Erie, reflected a very different perception of the proper role of the federal courts.