In the case of Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 1957, the U.S. Supreme Court was asked to decide whether a federal court in a diversity jurisdiction should apply state law or federal common law when determining if an employee can sue their employer for negligence. The plaintiff, Byrd, was injured while working on power lines owned by Blue Ridge and sought damages from his employer under South Carolina's workers' compensation statute which barred such suits unless there is clear evidence of negligence. However, under federal common law at that time, juries were allowed to determine questions of fact related to contributory negligence and assumption of risk defenses raised by employers. The Supreme Court ruled in favor of Byrd stating that although Erie Railroad Co v Tompkins required federal courts sitting in diversity jurisdiction to apply substantive state laws instead of creating its own rules (federal common law), this did not extend into procedural matters traditionally left for jury determination like issues regarding contributory negligence and assumption risk defenses raised by employers. Therefore it held that even though South Carolina’s rule might be partially substantive since it influenced outcome distribution between parties; where a State rule would disrupt Federal process balance without serving any substantial State interest - as here with right-to-jury issue – Federal Courts may use their discretion.

In the dissenting opinion for Byrd v. Blue Ridge Rural Electric Cooperative, Inc., Justice Frankfurter argued that the majority's decision undermined the principles of federalism and comity by allowing a federal court to disregard state law in a diversity case. He contended that it was not within the purview of federal courts to determine whether or not an issue should be decided by a judge or jury when state law had already made such provisions clear. In this particular case, South Carolina law stipulated that workmen’s compensation issues were to be determined judicially rather than through jury trials; hence, he believed this should have been respected by the Federal Court as well. The justice expressed concern about potential inconsistencies and confusion arising from different interpretations between state and federal courts on similar matters if each could decide independently how cases are adjudicated.