Application of State Procedural Rules In Federal Diversity Litigation

In S.A. Healy Co. v. Milwaukee Metropolitan Sewerage District, 60 F.3d 305, 309-10 (7th Cir. 1995), the court recognized that "the applicability of state procedural rules in federal diversity litigation is a knotty issue" and that no clear criteria exist for deciding whether a state rule is "substantive" for such purposes. However, the Healy court set forth some general guidelines. Initially, the Healy court recognized two classes of "pretty clear cases." Healy, 60 F.3d at 310. "The first consists of cases in which the state rule is in actual conflict with one of the federal rules, so that enforcing the state rule would knock out the federal rule. If the federal rule is within the scope of the Rules Enabling Act, 28 U.S.C. 2071 (a), the supremacy clause requires that the state rules give way." Healy, 60 F.3d at 310. The second class of "pretty clear cases" is where a "state procedural rule, though undeniably 'procedural' in the ordinary sense of the term, is limited to a particular substantive area, such as contract law." Healy, 60 F.3d at 310. In such cases: "The state's intention to influence substantive outcomes is manifest and would be defeated by allowing parties to shift their litigation into federal court unless the state's rule was applied there as well. Suppose a state (as many states have done) establishes a compulsory arbitration mechanism in medical malpractice cases in order to cut down on litigation and reduce malpractice insurance premiums. The state's goals are substantive--designed to shape conduct outside the court-room and not just improve the accuracy or lower the cost of the judicial process--though the means are procedural. The goals would be thwarted if parties having access to a federal district court under the diversity jurisdiction could thumb their noses at the compulsory procedure." Healy, 60 F.3d at 310.