Civil Procedure I, Pages 268–269

Guaranty Trust Co. v. York

Supreme Court of the United States, 1945

Facts:

Plaintiff sued a bond trustee in a federal diversity action alleging misrepresentation and breach of trust. New York substantive law governed. Defendant invoked the New York statute of limitations, which had already run. Plaintiffs argued that it did not bar the suit because it was on the "equity side" of federal court. The courts of equity had traditionally considered the length of time elapsing between the maturing of a claim and the bringing of suit but had not thought themselves strictly bound by statues of limitations.

Procedural History:

Based on that equitable tradition, the Second Circuit ruled that plaintiffs' suit was not barred.

Issue:

Are federal courts barred by state statutes of limitations in diversity cases?

Reasoning:

Federal outcomes of diversity cases should be the same as if the case were tried in a state court.

Rule/Holding:

Yes, federal courts barred by state statutes of limitations in diversity cases.

Judgment:

Reversed and remanded.

Takeaway:

Hesch: To apply state law, the conflict between state and federal laws must be “outcome determinative” (the “outcome determinative” test).

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