Swift #1-5

[DAVID BROWN <dbrown2@kentlaw.edu>]

1)	The Judiciary Act of 1789 called upon federal courts to apply state law as 
the rules of decision in diversity cases, at least where federal law did not 
preempt. The conflict in Swift was whether or not the decisions of a states 
courts were laws for this purpose. The Court held that state cases were not 
"law" under the Judiciary Act, but merely "evidence of what the laws are." 
Therefore federal courts were free to disregard state court decisions in 
diversity cases and could apply the "general law" of the United States as they 
interpreted it.
2)	New York case law conflicted with the general commercial law of the United 
States and older New York decisions. The general commercial law of the U.S. as 
ascertained by the Court allowed a pre-existing debt to serve as consideration 
for a note, allowing a subsequent holder of the note to be a holder in due 
course. New York court decisions questioned this rule and departed from the 
common law in not allowing a pre-existing debt to serve as consideration.

3)	No real conflict existed because the decisions of New York's high court, 
the Court of Error, were in accord with the common law and the "general law" 
of the United States. Therefore no real conflict existed. Both allowed a 
pre-existing debt to fulfill the "fair and valuable consideration" prong of 
the test for a holder in due course. However the Supreme Court of New York, 
which was and is that state's court of first instance, had seized upon 
dissenting opinions in the Court of Error's recent opinions to depart from the 
established rule. Lower court decisions holding that a pre-existing debt did 
not constitute valuable consideration were in conflict with those of the Court 
of Error and federal law, but New York law as announced by the state's high 
court did not conflict with federal "general" law.


4)	Justice Story considers the holder in due course rule a near-universal 
internationally recognized principle for which courts need not cite authority. 
He notes that decisions of local tribunals will receive "the most deliberate 
attention and respect" but that they are merely persuasive authority compared 
to the law of the "commercial world." Instead, he finds support for the rule 
in Cicero's quote "There shall not be one law at Rome, another at Athens, one 
now, another later...," an English case, a Connecticut case, as well as in 
policy arguments. He likely sees these as more authoritative sources than the 
relatively new courts of New York because they demonstrate centuries of 
established practice.

5)	Public international law recognizes a number of sources of law including 1) 
the customary practice of civilized states, 2) opinio juris, the teachings of 
the most qualified academics, 3) treaties, 4) the previous judgments of 
international courts and tribunals, and 5) domestic or national law, including 
court decisions. However, international law is based upon the civil law 
tradition and does not recognize stare decisis, so court decisions are 
indicative of what the law is, rather than a source of law themselves. The 
holder in due course theory as seen by Justice Story draws on the 
long-established practice of civilized states and the decisions of certain 
courts (England and Connecticut) as evidence of  the law.