United States v. Standard Oil Co of California

• Decision Date: 23 June 1947
• Docket Number: No. 235,235
• Parties: UNITED STATES v. STANDARD OIL CO. OF CALIFORNIA et al
• Court: U.S. Supreme Court

332 U.S. 301

67 S.Ct. 1604

91 L.Ed. 2067

UNITED STATES

v STANDARD OIL CO. OF CALIFORNIA et al.

No. 235.

Argued April 8, 9, 1947.

Decided June 23, 1947.

Mr. Frederick Bernays Wiener, of Providence, R.I., for petitioner.

Mr. Frank B. Belcher, of Los Angeles, Cal., for respondents.

Mr. Justice RUTLEDGE delivered the opinion of the Court.

Not often since the decision in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, is this Court asked to create a new substantive legal liability without legislative aid and as at the common law. This case of first impression here seeks such a result. It arises from the following circumstances.

Early one morning in February, 1944, John Etzel, a soldier, was hit and injured by a truck of the Standard Oil Company of California at a street intersection in Los Angeles. The vehicle was driven by Boone, an employee of the company. At the Government's expense of $123.45 Etzel was hospitalized, and his soldier's pay of $69.31 was continued during his disability. Upon the payment of $300 Etzel released the company and Boone 'from any and all claims which I now have or may hereafter have on account of or arising out of' the accident.¹

From these facts the novel question springs whether the Government is entitled to recover from the respondents as tort-feasors the amounts expended for hospitalization and soldier's pay, as for loss of Etzel's services. A jury being waived, the District Court made findings of fact and conclusions of law in the Government's favor upon all the issues, including those of negligence and contributory negligence. Judgment was rendered accordingly. D.C., 60 F.Supp. 807. This the Circuit Court of Appeals reversed, 9 Cir., 153 F.2d 958, and we granted certiorari because of the novelty and importance of the principal question.² 329 U.S. 696, 67 S.Ct. 670.

As the case reaches us, a number of issues contested in the District Court and the Circuit Court of Appeals have been eliminated.³ Remaining is the basic question of respondents' liability for interference with the government-soldier relation and consequent loss to the United States, together with questions whether this issue is to be determined by federal or state law⁴ and concerning the effect of the release.⁵ In the view we take of the case it is not necessary to consider the questions relating to the release,⁶ for we have reached the conclusion that respondents are not liable for the injuries inflicted upon the Government.

We agree with the Government's view that the creation or negation of such a liability is not a matter to be determined by state law. The case in this aspect is governed by the rule of Clearfield Trust Co. v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838, and National Metropolitan Bank v. United States, 323 U.S. 454, 65 S.Ct. 354, 89 L.Ed. 383, rather than that of Erie R. Co. v. Tompkins, supra. In the Clearfield case, involving liabilities arising out of a forged indorsement of a check issued by the United States, the Court said: 'The authority to issue the check had its origin in the Constitution and the statutes of the United States and was in no way dependent on the laws of Pensylvania or of any other state. Cf. Board of Commissioners (of Jackson County) v. United States, 308 U.S. 343, 60 S.Ct. 285, 84 L.Ed. 313; Royal Indemnity Co. v. United States, 313 U.S. 289, 61 S.Ct. 995, 85 L.Ed. 1361. The duties imposed upon the United States and the rights acquired by it as a result of the issuance find their roots in the same federal sources. Cf. Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 480, 84 L.Ed. 694; D'Oench, Duhme & Co. v. Federal Deposit Ins. Corporation, 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956. In the absence of an applicable Act of Congress it is for the federal courts to fashion the governing rule of law according to their own standards.' 318 U.S. at pages 366, 367, 63 S.Ct. at page 575, 87 L.Ed. 838.

Although the Clearfield case applied these principles to a situation involving contractual relations of the Government, they are equally applicable in the facts of this case where the relations affected are non-contractual or tortious in character.

Perhaps no relation between the Government and a citizen is more distinctively federal in character than that between it and members of its armed forces. To whatever extent state law may apply to govern the relations between soldiers or others in the armed forces and persons outside them or nonfederal governmental agencies, the scope, nature, legal incidents and consequences of the relation between persons in service and the Government are fundamentally derived from federal sources and governed by federal authority. See Tarble's Case (In re Tarble), 13 Wall. 397, 20 L.Ed. 597; Kurtz v. Moffitt, 115 U.S. 487, 6 S.Ct. 148, 29 L.Ed. 458. So also we think are interferences with that relationship such as the facts of this case involve. For, as the Federal Government has the exclusive power to establish and define the relationship by virtue of its military and other powers,⁷ equally clearly it has power in execution of the same functions to protect the relation once formed from harms inflicted by others.⁸

Since also the Government's purse is affected, as well as its power to protect the relationship, its fiscal powers, to the extent that they are available to protect it against financial injury, add their weight to the military basis for excluding state intrusion. Indeed, in this aspect the case is not greatly different from the Clearfield case or from one involving the Government's paramount power of control over its own property, both to prevent its unauthorized use or destruction and to secure indemnity for those injuries. ⁹

As in the Clearfield case, moreover, quite apart from any positive action by Congress, the matter in issue is neither primarily one of state interest nor exclusively for determination by state law within the spirit and purpose of the Erie decsion. The great object of the Erie case was to secure in the federal courts, in diversity cases, the application of the same substantive law as would control if the suit were brought in the courts of the state where the federal court sits. It was the so-called 'federal common law' utilized as a substitute for state power, to create and enforce legal relationships in the area set apart in our scheme for state rather than for federal control, that the Erie decision threw out. Its object and effect were thus to bring federal judicial power under subjection to state authority in matters essentially of local interest and state control.

Conversely there was no purpose or effect for broadening state power over matters essentially of federal character or for determining whether issues are of that nature. The diversity jurisdiction had not created special problems of that sort. Accordingly the Erie decision, which related only to the law to be applied in exercise of that jurisdiction, had no effect, and was intended to have none, to bring within the governance of state law matters exclusively federal, because made so by constitutional or valid congressional command, or others so vitally affecting interests, powers and relations of the Federal Government as to require uniform national disposition rather than diversified state rulings. Cf. Clearfield Trust Co. v. United States, 318 U.S. at pages 366—368, 63 S.Ct. at pages 574—576, 87 L.Ed. 838. Hence, although federal judicial power to deal with common-law problems was cut down in the realm of liability or its absence governable by state law, that power remained unimpaired for dealing independently, wherever necessary or appropriate, with essentially federal matters, even though Congress has not acted affirmatively about the specific question.

In this sense therefore there remains what may be termed, for want of a better label, an area of 'federal common law' or perhaps more accurately 'law of independent federal judicial decision,' outside the constitutional realm, untouched by the Erie decision. As the Government points out, this has been demonstrated broadly not only by the Clearfield and National Metropolitan Bank cases, but also by other decisions rendered here since the Erie case went down, ¹⁰ whether or not the Government is also correct in saying the fact was foreshadowed the same day by Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 110, 58 S.Ct. 803, 811, 82 L.Ed. 1202, in a unanimous opinion delivered likewise by Mr. Justice Brandeis.¹¹

It is true, of course, that in many situations, and apart from any supposed influence of the Erie decision, rights, interests and legal relations of the United States are determined by application of state law, where Congress has not acted specifically. 'In our choice of the applicable federal rule we have occasionally selected state law.' Clearfield Trust Co. v. United States 318 U.S. at page 367, 63 S.Ct. at page 575, 87 L.Ed. 838. The Government, for instance, may place itself in a position where its rights necessarily are determinable by state law, as when it purchases real estate from one whose title is invalid by that law in relation to another's claim. Cf. United States v. Fox, 94 U.S. 315, 24 L.Ed. 192.¹² In other situations it may fairly be taken that Congress has consented to application of state law, when acting partially in relation to federal interests and functions, through failure to make other provision concerning matters ordinarily so governed.¹³ And in still others state law may furnish convenient solutions in no way inconsistent with adequate protection of the federal interest.

But we do not undertake to delimit or categorize the instances where it is properly to be applied outside the Erie aegis. It is enough for present purposes to point out that they exist, cover a variety of situations, and generally involve matters in which application of local law not only affords a convenient and fair mode of...