January 24, 2016

Guaranty Trust Co v. York | Case Brief - US Supreme Court - 326 U.S. 99, 65 S.Ct. 1464

FACTS:  Plaintiff filed in New York Federal District court a diversity suit in equity for fraud in connection with certain transactions in which the defendant participated in in 1931.  Defendant pleaded statute of limitations involving the New York rule applied.  Plaintiff contended that the more flexible doctrine of laches, traditionally followed by federal courts in equity suits should be followed. 

HISTORY: Court of Appeals held that the federal trial court should have applied not the strict New York time rule but the more elastic federal laches doctrine, reversing a summary judgment for the defendant. 

ISSUE: Whether when no recovery in state court can be, can a federal court take over the suit because there is diversity of citizenship between the parties? 

HOLDING: No 

RATIONALE: A federal court adjudicating a state-created right solely because of diversity of citizenship is for effect only another court of the state and cannot afford a recovery if the right is not available in the state.  Need to look at if the disregarding the state statute would lead to a different outcome, than if matter was tried in state court because the outcome should be the same.  "Congress afforded out-of-state litigants another tribunal, not another body of law." 

DISPOSITION: Judgment reversed and case remanded for proceedings consistent w/ this opinion.

DISSENT: Divisions between adjective law and substantive law still remains to divide power of Congress from that of the states and consequently to determine power of the federal courts to apply federal law or state law in diversity matters.