1. In diversity of citizenship cases, the federal courts, when
deciding questions of conflict of laws, must follow the rules
prevailing in the States in which they sit. Erie R. Co. v.
Tompkins, 304 U. S. 64
313 U. S.
2. In an action in a federal court. in Delaware, for breach of a
New York contract, the applicability of a New York statute
directing that interest be added to the recovery in contract cases
is a question of conflict of laws, which the federal court must
determine by the law of Delaware. P. 313 U. S.
3. The Full Faith and Credit Clause does not require that a
State, contrary to its own policy, shall give effect in actions
brought locally on contracts made in other States, to laws of those
States relating, not to the validity of such contracts, but to the
right to add interest to the recovery as an incidental item of
Page 313 U. S. 488
§ 480 N.Y.Civ.Prac. Act. John Hancock Mutual Life Inc. Co.
v. Yates, 299 U. S. 178
distinguished. P. 313 U. S.
115 F.2d 268, reversed.
Certiorari, 312 U.S. 674, to review the affirmance of a judgment
recovered for breach of a contract, 30 F. Supp.
. The review in this Court was limited to the question
whether § 480 of the New York Civil Practice Act is applicable to
an action in the federal court in Delaware.
Page 313 U. S. 494
MR. JUSTICE REED delivered the opinion of the Court.
The principal question in this case is whether, in diversity
cases, the federal courts must follow conflict of laws rules
prevailing in the states in which they sit. We left this open in
Ruhlin v. New York Life Insurance Co., 304 U.
, 304 U. S. 208
note 2. The frequent recurrence of the problem, as well as the
conflict of approach to the problem between the Third Circuit's
opinion here and that of the First Circuit in Sampson v.
110 F.2d 754, 759-762, led us to grant
In 1918, respondent, a New York corporation, transferred its
entire business to petitioner, a Delaware corporation. Petitioner
contracted to use its best efforts to further the manufacture and
sale of certain patented devices covered by the agreement, and
respondent was to have a share of petitioner's profits. The
agreement was executed in New York, the assets were transferred
there, and petitioner began performance there although later it
moved its operations to other states. Respondent was voluntarily
dissolved under New York law in 1919. Ten years later, it
instituted this action in the United States District Court for the
District of Delaware, alleging that petitioner had failed to
perform its agreement to use its best efforts. Jurisdiction rested
on diversity of citizenship. In 1939, respondent recovered a jury
verdict of $100,000, upon which judgment was entered. Respondent
then moved to correct the judgment by adding interest
Page 313 U. S. 495
at the rate of six percent from June 1, 1929, the date the
action had been brought. The basis of the motion was the provision
in section 480 of the New York Civil Practice Act directing that,
in contract actions, interest be added to the principal sum
"whether theretofore liquidated or unliquidated." [Footnote 1
] The District Court granted the
motion, taking the view that the rights of the parties were
governed by New York law and that, under New York law, the addition
of such interest was mandatory. 30 F. Supp.
, 431. The Circuit Court of Appeals affirmed, 115 F.2d 268,
275, and we granted certiorari, limited to the question whether
section 480 of the New York Civil Practice Act is applicable to an
action in the federal court in Delaware. 312 U.S. 674.
The Circuit Court of Appeals was of the view that, under New
York law, the right to interest before verdict under section 480
went to the substance of the obligation, and that proper
construction of the contract in suit fixed New York as the place of
performance. It then concluded that section 480 was applicable to
the case because
"it is clear by what we think is undoubtedly the better view of
the law that the rules for ascertaining the measure of damages are
not a matter of procedure at all, but are
Page 313 U. S. 496
matters of substance which should be settled by reference to the
law of the appropriate state according to the type of case being
tried in the forum. The measure of damages for breach of a contract
is determined by the law of the place of performance; Restatement,
Conflict of Laws § 413."
The court referred also to section 418 of the Restatement, which
makes interest part of the damages to be determined by the law of
the place of performance. Application of the New York statute
apparently followed from the court's independent determination of
the "better view," without regard to Delaware law, for no Delaware
decision or statute was cited or discussed.
We are of opinion that the prohibition declared in Erie R.
Co. v. Tompkins, 304 U. S. 64
against such independent determinations by the federal courts
extends to the field of conflict of laws. The conflict of laws
rules to be applied by the federal court in Delaware must conform
to those prevailing in Delaware's state courts. [Footnote 2
] Otherwise, the accident of
diversity of citizenship would constantly disturb equal
administration of justice in coordinate state and federal courts
sitting side by side. See Erie R. Co. v. Tompkins, supra,
at 304 U. S. 74
Any other ruling would do violence to the principle of uniformity
within a state upon which the Tompkins
decision is based.
Whatever lack of uniformity this may produce between federal courts
in different states is attributable to our federal system, which
leaves to a state, within the limits permitted by the Constitution,
the right to pursue local policies diverging from those of its
neighbors. It is not for the federal courts to thwart such local
policies by enforcing an independent "general law" of conflict of
laws. Subject only to review by this Court
Page 313 U. S. 497
on any federal question that may arise, Delaware is free to
determine whether a given matter is to be governed by the law of
the forum or some other law. Cf. Milwaukee County v. White
Co., 296 U. S. 268
296 U. S. 272
This Court's views are not the decisive factor in determining the
applicable conflicts rule. Cf. Funkhouser v. J. B. Preston
Co., 290 U. S. 163
the proper function of the Delaware federal court is to ascertain
what the state law is, not what it ought to be.
Besides these general considerations, the traditional treatment
of interest in diversity cases brought in the federal courts points
to the same conclusion. Section 966 of the Revised Statutes, 28
U.S.C. § 811, relating to interest on judgments, provides that it
be calculated from the date of judgment at such rate as is allowed
by law on judgments recovered in the courts of the state in which
the court is held. In Massachusetts Benefit Association v.
Miles, 137 U. S. 689
this Court held that section 966 did not exclude the allowance of
interest on verdicts as well as judgments, and the opinion observed
that "the courts of the state and the federal courts sitting within
the state should be in harmony upon this point." (P. 137 U. S.
Looking, then, to the Delaware cases, petitioner relies on one
group to support his contention that the Delaware state courts
would refuse to apply § 480 of the New York Civil Practice Act, and
respondent on another to prove the contrary. We make no analysis of
these Delaware decisions, but leave this for the Circuit Court of
Appeals when the case is remanded.
Respondent makes the further argument that the judgment must be
affirmed because, under the full faith and credit clause of the
Constitution, Art. 4, § 1, the state courts of Delaware would be
obliged to give effect to the New York statute. The argument rests
mainly on the decision of this Court in John
Hancock Mutual Life Ins. Co. v. Yates,
Page 313 U. S. 498
299 U. S. 178
where a New York statute was held such an integral part of a
contract of insurance that Georgia was compelled to sustain the
contract under the full faith and credit clause. Here, however,
section 480 of the New York Civil Practice Act is in no way related
to the validity of the contract in suit, but merely to an
incidental item of damages, interest, with respect to which courts
at the forum have commonly been free to apply their own or some
other law as they see fit. Nothing in the Constitution ensures
unlimited extraterritorial recognition of all statutes or of any
statute under all circumstances. Pacific Employers Insurance
Co. v. Industrial Accident Comm'n, 306 U.
; Kryger v. Wilson, 242 U.
. The full faith and credit clause does not go so
far as to compel Delaware to apply section 480 if such application
would interfere with its local policy.
Accordingly, the judgment is reversed and the case remanded to
the Circuit Court of Appeals for decision in conformity with the
law of Delaware.
Section 480, New York Civil Practice Act:
"Interest to be included in recovery. Where in any action,
except as provided in section four hundred eighty-a, final judgment
is rendered for a sum of money awarded by a verdict, report, or
decision, interest upon the total amount awarded, from the time
when the verdict was rendered or the report or decision was made to
the time of entering judgment, must be computed by the clerk, added
to the total amount awarded, and included in the amount of the
judgment. In every action wherein any sum of money shall be awarded
by verdict, report, or decision upon a cause of action for the
enforcement of or based upon breach of performance of a contract,
express or implied, interest shall be recovered upon the principal
sum, whether theretofore liquidated or unliquidated, and shall be
added to and be a part of the total sum awarded."
An opinion in Sampson v. Channell,
110 F.2d 754,
759-762, reaches the same conclusion, as does an opinion of the
Third Circuit handed down subsequent to the case at bar,
Waggaman v. General Finance Co.,
116 F.2d 254, 257.
Goodrich, Conflict of Laws, § 12.