In a diversity case, federal trial courts must apply the state law standard when evaluating a new trial motion based on excessive verdicts. This principle arises from the doctrine of Erie Railroad Co. v. Tompkins, which established that federal courts sitting in diversity must apply state substantive law. As a result, when considering whether a damages award is excessive, the federal court will look to the standards set by the applicable state law, which governs the issue of damages, including any specific thresholds for what constitutes excessive damages in tort or contract actions.
For example, if the jurisdiction's law provides certain parameters for damages awards—such as caps on recovery in specific cases or guidelines for what is considered reasonable—those state-specific rules will guide the federal trial court's analysis. This ensures consistent application of the law and respects the rights and expectations of the parties under the governing state law.
In contrast, using the federal standard for excessive damages, the constitutional standard of fairness, or relying solely on precedent could lead to outcomes that do not align with state law, which could undermine the intent of the diversity jurisdiction and the principles outlined in the Erie doctrine.