The United States Supreme Court, in 1938, deciding the case of Erie Railroad Co. v. Tompkins, held that a federal court in a diversity of citizenship case must apply state law rather than federal law to the controversy. The Court subsequently held in 1941, in Klaxon Co. v. Stentor Electric Mfg. Co., Inc., that the Erie case necessitated a ruling that a federal court, sitting solely on the basis of diversity jurisdiction, had to use the conflict of law rules of the state in which it was "sitting" in determining which state's law was applicable to the controversy. Eight years later, a ruling in Woods v. Interstate Realty Co., clearly announced that because of the Erie case, a federal court had to close its doors to a diversity of citizenship action, if the state in which it was "sitting" had a statute consistent with the United States Constitution which closed the doors of that state's courts to the same action.
Louis L. Manderino,
Erie v. Tompkins: A Geography Lesson,
Duq. L. Rev.
Available at: https://dsc.duq.edu/dlr/vol5/iss4/3