7. Can federal courts hear matters of state law? And vice versa?
It depends. A state trial court may hear a case involving a federal question under certain circumstances. There are, however, certain types of cases that a state court cannot hear. Those cases involve a legal situation in which the applicable federal law preempts the entire area of law, such as immigration or bankruptcy. Likewise, a federal trial court may hear a state-law case under certain circumstances. For a federal court to hear a state matter and vice versa, courts must have subject-matter jurisdiction over some legal issue in the case. This generally occurs in two circumstances: 1) the case may involve a mixture of state and federal law, or 2) the the case is a “diversity action”. If a case involving federal law also involves issues of state law, the federal court may adjudicate the state law issues arising in that case. Likewise, a state court hearing issues of state law case may apply federal law to adjudicate a federal law issue. Lastly, a federal court has subject-matter jurisdiction over diversity cases that involve only state law. The federal court will apply the substantive law of the state in which the court is located. The court will apply federal procedural law unless the federal procedural law would likely change the outcome of the case or is “outcome determinative”. In such event, the state procedural law will apply. These rules are known collectively as the “Erie Doctrine”.
• Discussion: Why do you think it is important to limit the ability of state courts to hear federal law issues and vice versa? Is there a good argument to allow greater ability of state and federal courts to hear issues solely involving the other’s law?
• Practice Question: Zora hires Isabelle as a contractor to design and manufacture a new baby product. Zora files and successfully prosecutes a utility patent on the product. In the contract with Isabelle, she agrees not to copy, trade, or otherwise employ the patented work. Isabelle later takes Zora’s design and begins producing a knock-off version of the product. Zora brings a legal action against Isabelle for patent infringement. Patent law is exclusively federal and preempts all state law. Zora also sues Isabelle breach of contract under New York Law. What are the subject-matter jurisdiction issues if Zora sues Isabelle in federal district court? What are the issues if Zora sues in state court?