The Federal Equity Power
66 Pages Posted: 28 Feb 2017 Last revised: 28 Jan 2018
Date Written: March 1, 2017
Throughout the first century and a half of our nation’s history, federal courts treated equity as a type of general law. They applied a uniform, freestanding body of principles derived from the English Court of Chancery to all equitable issues that came before them, regardless of whether a case arose under federal or state law.
In 1945, in Guaranty Trust Co. v. York, the United States Supreme Court held that, notwithstanding the changes wrought by the Erie Doctrine, federal courts may continue to rely on these traditional principles of equity to determine the availability of equitable relief, such as injunctions, even in cases arising under state law. This so-called “equitable remedial rights doctrine” is based on an anachronistic misunderstanding of the nature of the federal equity power. Equity should not be understood as a single, independent body of principles that a federal court must apply in all cases that come before it. Rather, a federal court’s power to impose an equitable remedy stems, if at all, from the legal authority that establishes the underlying right.
For state-law claims, a federal court must apply state statutes and precedents—not uniform, centrally devised federal standards—to determine the availability of equitable relief. The manner in which state-created rights are protected is as much a matter of substantive state policy as a state’s initial creation and allocation of those rights. When adjudicating a federal statutory claim, the underlying federal statute itself governs the availability of equitable relief; a federal court may presume Congress intended that traditional equitable principles apply as a matter of statutory interpretation, unless the statute’s text or legislative history contains a clear statement to the contrary. Finally, for constitutional claims, federal courts may apply traditional equitable principles as a matter of constitutional common law, unless Congress displaces them with a valid alternative remedial scheme.
Keywords: Erie, Equity, Equitable Rights, Remedies, Injunctions, Receiverships, Equitable Liens, Rules of Decision Act, Federalism, Civil Procedure, Separation of Powers
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