Under the Erie doctrine, in federal courts sitting in diversity, which law governs substantive issues?

• A. Federal Courts Apply State Substantive Law And Federal Procedural Law In Diversity To Ensure Consistency With State Law On Substantive Issues.
• B. Federal Courts Always Apply Federal Common Law In Diversity.
• C. Federal Courts Apply Only State Procedural Law In Diversity.
• D. Federal Courts Apply Only State Substantive Law In Diversity.

Answer: (A)

Erie requires that in federal courts sitting in diversity, substantive rights and liabilities are governed by state law, while the procedure used to run the case is governed by federal law. The aim is to keep the outcome of disputes in federal court aligned with the same substantive rules that would apply in a state court, preventing the federal forum from creating its own private-law rules. At the same time, the federal procedural framework—like the Federal Rules of Civil Procedure—provides uniform rules for how the case is managed in federal court. So, the rule is to apply state substantive law and federal procedural law in diversity.