416
Syllabus
(a) To heighten the judicial check on the size of jury awards, New York codified the "deviates materially" standard of review, replacing the judge-made "shock the conscience" formulation previously used in New York courts. In design and operation, § 5501(c) influences outcomes by tightening the range of tolerable awards. Although phrased as a direction to New York's intermediate appellate courts, § 5501(c)'s "deviates materially" standard, as construed by New York's courts, instructs state trial judges as well. Pp. 422-425. (b) In cases like Gasperini's, in which New York law governs the claims for relief, the Court must determine whether New York law also supplies the test for federal-court review of the size of the verdict. Federal diversity jurisdiction provides an alternative forum for the adjudication of state-created rights, but it does not carry with it generation of rules of substantive law. Under the doctrine of Erie R. Co. v. Tompkins, 304 U. S. 64, federal courts sitting in diversity apply state substantive law and federal procedural law. Classification of a law as "substantive" or "procedural" for Erie purposes is sometimes a challenging endeavor. Guaranty Trust Co. v. York, 326 U. S. 99, an early interpretation of Erie, propounded an "outcome-determination" test: "[D]oes it significantly affect the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?" 326 U. S., at 109. A later pathmarking case, qualifying Guaranty Trust, explained that the "outcome-determination" test must not be applied mechanically to sweep in all manner of variations; instead, its application must be guided by "the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws." Hanna v. Plumer, 380 U. S. 460, 468.
Informed by these decisions, the Court concludes that, although § 5501(c) contains a procedural instruction assigning decisionmaking authority to the New York Appellate Division, the State's objective is manifestly substantive. More rigorous comparative evaluations attend application of § 5501(c)'s "deviates materially" standard than the common-law "shock the conscience" test. If federal courts ignore the change in the New York standard and persist in applying the "shock the conscience" test to damage awards on claims governed by New York law, " 'substantial' variations between state and federal [money judgments]" may be expected. See id., at 467-468. The Court therefore agrees with the Second Circuit that New York's check on excessive damages warrants application in federal court, for Erie's doctrine precludes a recovery in federal court significantly larger than the recovery that would have been tolerated in state court. Pp. 426-431.
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