What is Federal Common Law?
Federal common law refers to the law that is created by judges within the federal court system. There is a common misconception that there is no federal common law. Federal judicial decisions are binding in a number of areas where Congress has granted the federal courts jurisdiction.
Federal Common Law is Derived from Judges, not Statutes
Federal common law is created by federal judges, which differentiates it from statutory based laws. The decisions made by these federal judges, regarding a specific legal issue, are binding within that court and lower federal courts within the same jurisdiction. The goal is to set uniformity and predictability with federal laws.
There is Federal Common Law, but Only for Federal Cases
The Supreme Court has ruled, in Erie Railroad v. Tomkins, that there is no federal general common law. Erie, 304 U.S. 64 (1938). This means that the federal courts, while sitting in diversity jurisdiction (where a federal judge hears a claim under state law), will not create law to judge state law cases. Instead, the prior decisions of the state judges will be followed by the federal judges. However, when it is an area of federal jurisdiction, the federal judges will create, and follow, federal common law.
Federal Judicial Decisions Affect Areas such as Maritime, Bankruptcy and Civil rights
Federal judicial decisions are binding in areas such as maritime, bankruptcy, and a number of other legal areas. The Supreme Court, and lower federal courts, can establish law where Congress has been silent. Recently, the Supreme Court, in Exxon v. Baker, established federal common law which placed strict limits on maritime punitive damage awards. Exxon, 554 U.S. 471 (2008). But when Congress acts, the statutes they pass will trump prior federal judicial decisions.