Case: Parties

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Guaranty Trust Co. v York Plaintiff - Guaranty Trust Defendant - York

Procedural History/Facts: Plaintiff sued in a federal diversity action, and NY substantive law governed. Defendant invoked NY statute of limitations, which would bar the suit. Plaintiffs argued that it did not bar the suit, because it was on the "equity side" of federal court. This mean that federal courts traditionally don’t bind themselves to a strict statute of limitations, but considered each suit. Due to this equitable tradition, 2nd circuit ruled that plaintiff's suit was not barred. Now before the Supreme Court. Issue: When a state court cannot rule because the suit is barred by the statute of limitations, and the federal court can take it because there is diversity, can the federal court take the case in equity, or must they use the state's statute of limitations? Holding: Supreme Court reversed the 2nd Circuit ruling. The federal diversity courts were required to apply state law to determine the outcome of litigation, regardless of whether the remedy was in law or in equity. Reasoning: This only came to federal court because of diversity. It is not a federal question. Erie Case says you must apply the laws of the state. substantive law - the part of the law that creates, defines, and regulates the rights, duties, and powers of the parties. In equity - apply fairness, no strict statute of limitations Notes • Statute of limitations is not substantive, but merely procedural. So federal tradition of equity (based on fairness, so no statute of limitations), is ok to use because it is procedural. • Outcome Determination Test - different outcome if using the diff laws (state v fed). If the ruling law makes the diff on who wins, then it is substantive. This test doesn’t work. ○ What's wrong with this rule? (note 2, pg 203) Because then everything can be substantive. You can hypothetically use this test for outcome determinative for every aspect of the filing process.