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In diversity cases that raise state law issues of first impression, federal appellate courts must try to predict how the state’s highest court would rule on the issue. When a federal circuit has done just that — ruled on a novel issue of law from a state within its jurisdiction — should other federal circuits simply defer to its decision as the “home circuit” for that state, or should they make their own Erie determination? The federal circuits have wrestled with this question, with inconsistent guidance from the U.S. Supreme Court on the extent to which deference to the state law expertise of local federal courts is warranted.

The 2d U.S. Circuit Court of Appeals first addressed the issue of “home circuit” deference in Factors Etc. Inc. v. Pro Arts Inc., 652 F.2d 278 (2nd Cir. 1981), in which it faced an issue of first impression under Tennessee law. Although the Tennessee courts had not ruled on the issue, the 6th Circuit had addresed it in an earlier diversity case.

Judge Jon Newman concluded that the court should give “conclusive deference” to the 6th Circuit’s interpretation of Tennessee law because doing so minimized the disruptive effect of diversity jurisdiction on the orderly development of Tennessee law and promoted fairness to the public by preventing needless doctrinal divisions. Id. at 279, 282.