BPS I Civil Procedure Practice Test 2025 – The Complete All-in-One Guide to Exam Success!

In a diversity case, the governing law is determined primarily by the relevant state law where the court sits, which is intended to provide consistency and predictability in the legal process. This is rooted in the principle of Erie Railroad Co. v. Tompkins, which mandates that federal courts apply state substantive law when adjudicating cases based on diversity jurisdiction.

In the context of this question, the ruling by the highest court of the state where the case is being heard will control the interpretation and application of state law. This ensures that federal courts do not create different laws in diversity cases that could undermine the cohesion of state legal systems. Therefore, the outcome of the case would be influenced directly by how the highest court of State A has interpreted the relevant legal issues, thereby reflecting the substantive law of that jurisdiction.

Other options might suggest considerations that are not the primary governing factors in a diversity case. For instance, while federal law applies in certain federal questions, it does not govern in situations purely involving state law when diversity jurisdiction is at play. Similarly, an employer’s internal policies or a district court's opinion do not carry the authoritative weight of state law and may not necessarily align with state law standards applied by courts.