"Mend the Hold" and Erie: Why an Obscure Contracts Doctrine Should Control in Federal Diversity Cases

Suppose an insurance company rejects a policyholder's claim, giving a specific reason for the denial in a declination letter. Convinced that this reason is not valid, the policyholder sues the company for breach of contract. Should a court permit the insurance company to raise defenses not based on the specific reason given in the declination letter?' Under one version of the common law "mend the hold" doctrine, the answer is no. Furthermore, despite the procedural flavor of the rule, under modern Erie analysis the mend the hold doctrine represents the sort of state prerogative that federal courts sitting in diversity must respect. The phrase "mend the hold" comes from nineteenth century wrestling parlance where it meant "get a better grip (hold) on your opponent."2 Its first appearance in a judicial opinion was in a nineteenth century Supreme Court decision that refused a party in a contract suit the right to defend its nonperformance with a defense that it had not raised before the close of evidence.' Since then, the doctrine has evolved into two modern forms. Under the Illinois (minority) version of the rule, absent a good faith justification for a change in position, a defendant in a breach of contract action is confined to the first defense raised once the litigation is underway.4 In contrast, the majority version of the doc-