Work through a fresh Erie diversity trap with examiner-style analysis on borrowing statutes, outcome-determinative rules, and the Hanna line.
Marisol, an Indiana citizen, files a diversity suit in the Southern District of Indiana against Pace Logistics, an Illinois LLC, for a warehouse fire in Illinois that destroyed $200,000 of her inventory. Indiana has a borrowing statute that requires Indiana courts to apply the shorter of Indiana's or the foreign jurisdiction's statute of limitations. Illinois's SoL for property damage is two years; Indiana's is four. Marisol files three years after the fire. Indiana also has a statute that requires plaintiffs in commercial fire-loss cases to post a $5,000 bond before discovery may begin. Pace moves to dismiss as time-barred and, in the alternative, to require the bond. The federal court must decide which Indiana rules to apply.
The federal court must apply both the Indiana borrowing statute (dismissing the case as time-barred under Illinois's two-year SoL) and the Indiana pre-discovery bond requirement. Under Erie, a federal court sitting in diversity applies state substantive law and federal procedural law. Statutes of limitations are substantive under Guaranty Trust v. York because they are outcome-determinative; borrowing statutes are part of the state's SoL machinery and travel with it. Where a state rule conflicts with a Federal Rule of Civil Procedure on point, Hanna v. Plumer applies the Federal Rule so long as it is valid under the Rules Enabling Act. For state rules with no Federal Rule on point, courts apply the modified outcome-determinative test under Byrd and Hanna, asking whether ignoring the state rule would encourage forum shopping or cause inequitable administration of the laws.
Sitting in diversity, must the federal court apply (a) Indiana's borrowing statute (which would import Illinois's shorter SoL and bar the case) and (b) Indiana's pre-discovery bond requirement?
Under Erie, a federal court sitting in diversity applies state substantive law and federal procedural law. Statutes of limitations are substantive under Guaranty Trust v. York because they are outcome-determinative; borrowing statutes are part of the state's SoL machinery and travel with it. Where a state rule conflicts with a Federal Rule of Civil Procedure on point, Hanna v. Plumer applies the Federal Rule so long as it is valid under the Rules Enabling Act. For state rules with no Federal Rule on point, courts apply the modified outcome-determinative test under Byrd and Hanna, asking whether ignoring the state rule would encourage forum shopping or cause inequitable administration of the laws.
The Indiana borrowing statute is part of Indiana's SoL framework. Statutes of limitations are substantive under Guaranty Trust because their application changes the case outcome, and a borrowing statute is just the choice-of-SoL component of the same machinery…