Rules of Decision Act
The Rules of Decision Act mandates that substantive state law be applied in state cases, unless the United States Constitution, Treaties of the United States, or Congress says otherwise. The federal courts' authority to exercise general federal common law in state cases sitting in diversity jurisdiction were made possible by the Rules of Decision Act. This was later overturned in Erie. In significant part, the rule authorizes congress to make rules that must be followed by the federal courts. This later becomes problematic when a collision between substantive state right laws conflict with federal rules of procedure.
As established in Erie R. Co. v. Tompkins there is no such thing as Federal General Common Law, so whenever there is no Federal Statute on point, State Law must be used.
This act came from Section 34 of the Judiciary Act of 1789. It is now codified, in slightly different form, in 28 U.S.C. ยง 1652.
It states that:
The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply.
Its interpretation, especially the meaning of "the laws of the several states," was central to the issue in Erie Railroad Co. v. Tompkins.
This interpretation has been called into question by Professor Wilfrid J. Ritz. At the time of the drafting of the Rules of Decision Act, modern reporting standards of state opinions did not exist. Reporting of these decisions was not regular until the nineteenth century. Therefore, at the time the Rules of Decision Act was written, there would have been no manner by which federal courts could have ascertained the common law of the states.
Rather, Professor Ritz opined that "Section 34 is a direction to the national courts to apply American law, as distinguished from English law. American law is to be found in the 'laws of the several states' viewed as a group of eleven states in 1789, and not viewed separately and individually. It is not a direction to apply the law of a particular state, for if it had been so intended, the section would have referred to the 'laws of the respective states.'" Wilfrid Ritz, Rewriting the History of the Judiciary Act of 1789 at 51 (Wythe Holt & Lewis H. LaRue eds., 1990)