The legal system within the United States is made up of federal and state courts that resolve legal disputes and interpret the laws established by federal and state governments. The U.S. legal system is based on a system of federalism, which means the federal government possesses power to govern certain conduct while the states retain the power govern conduct not specifically regulated by the federal government. Accordingly, the legal system consists of laws established by both federal and state governments from four primary sources: constitutions, statutes, administrative regulations, and common law.

Generally, with some exceptions, federal courts interpret legal disputes that arise under the federal sources of law while state courts resolve legal issues that arise under state sources of law. The fact that federal courts usually resolve and interpret federal law issues does not make these courts superior to state courts. Rather, the federal and state court systems operate parallel to each other within the U.S. legal system. Under the legal system, certain court decisions have the ability to influence subsequent decisions of different courts in cases that involve similar legal issues, which is known as “precedent”. In most instances, however, court rulings only impact the courts within the same legal system and geographical boundary or “jurisdiction”.

This article discusses the basic concepts and structure of the federal and state court systems, and also explains which courts are bound to the precedential decisions of another court.

Common Law

The U.S. judiciary—federal and state courts—operate under a common law system. The common law, which originated in England, was adopted by the American colonies and ultimately developed each states’ original body of law. Common law, also known as “case law”, is the body of law created by judges through written decisions rather than from statutes or constitutions. Generally, common law courts analyze and interpret other sources of law and apply the law to specific facts of a case to make a legal decision.

The common law system is premised on the idea of having predictable and consistent outcomes to cases with similar facts and legal issues in question. Hence, the defining principle of common law is precedents, which is the requirement that judges must follow binding legal decisions of prior courts. Judges accomplish this requirement by interpreting the law and issuing rulings in the same manner as these earlier court decisions. Precedents is rooted in the doctrine of stare decisis, which is a Latin phrase meaning “to stand by things decided”. Thus, in cases involving similar facts and legal disputes that have previously been resolved by courts in the same geographical boundary or “jurisdiction”, judges are generally bound to follow these past precedential decisions and apply the same legal reasoning of those prior cases.

In certain instances, there are cases that pose distinct facts or legal issues from all prior cases within their jurisdiction and the other sources of law are either silent or ambiguous on the issue. This is known as a “case of first impression” and judges are required to make a decision on the issue even though there is no precedent binding on the case. In these cases, judges generally consider decisions from courts in other jurisdictions—if such decisions exist—that have ruled on the issue. Nevertheless, judges are not obligated to follow the same reasoning of these court decisions because stare decisis principles only requires judges to follow precedential decisions that are binding on their court.


There are two separate types of precedent that judges consider: mandatory or binding precedent, and persuasive precedent. If precedent is binding, courts are required to follow those earlier decisions. Thus, lawyers generally attempt to use prior cases that are binding precedent to support their client’s case because judges are required to follow these earlier decisions and rule in a similar manner. Alternatively, courts are not obligated to follow persuasive precedent, but they may consider it to determine how courts in other jurisdictions resolve particular legal issues. This is also true for other sources of law. For example, a state court may consider a federal statute or regulation to resolve a state law dispute, but such federal laws are only persuasive authority on the state court.

Essentially, earlier court decisions are binding or persuasive on a court if the prior decision was decided by a higher-level court within the same jurisdiction.

Court Hierarchy

As a general matter, higher-level courts bind the lower courts and lower courts are never binding on higher courts within the same jurisdiction. Federal court decisions, with the exception of the U.S. Supreme Court, do not bind state courts while state court decisions generally do not bind federal courts. Thus, in order to determine whether a prior court decision is binding or persuasive precedent, it is necessary to understand the hierarchy and jurisdictions of the federal and state court systems.

Federal Courts

The federal court system consists of three levels of courts. The U.S. District Courts are the trail-level courts and are the lowest courts in the federal system. There are 94 district courts throughout the U.S. and each state has at least one district court. Cases at the district court level consist of one judge that tries the case and, in most cases, a jury that decides the case. District court decisions are not binding on other federal courts, even the federal district courts in the same geographical jurisdiction.

Next, the U.S. Courts of Appeals (or “circuit courts”) are the intermediate-level appellate courts and are a level above the district courts. In other words, federal district courts are bound to the decisions of the federal circuit courts. The circuit courts are organized into 12 regional circuits and a Federal Circuit that resolves certain legal disputes such as international trade issues, administrative agency decisions, and claims against the federal government.

Each of the 12 regional circuits contain a number of district courts within its jurisdiction. For instance, the jurisdictional boundary of U.S. Court of Appeals for the Fifth Circuit includes the federal district courts located in the states of Louisiana, Mississippi, and Texas. Hence, Fifth Circuit legal decisions are binding on each of the federal district courts located within these states. Circuit courts are technically not bound to its own legal decisions, but each circuit generally adopts its prior decisions as “law of the circuit”, meaning these earlier decisions are recognized as binding precedent for that circuit court.

Federal circuit court decisions are not binding precedent on any other federal circuit or district court outside of its jurisdiction. Accordingly, this sometimes leads to contradictory decisions among the different circuit courts on the same legal issue. Further, federal circuit court decisions are not binding on the state courts that are geographically located within the boundaries of the circuit’s jurisdiction. For example, a Mississippi state court judge is not required to follow decisions of the Fifth Circuit.

Finally, the U.S. Supreme Court is the highest court within the federal court system. The U.S. Supreme Court may, at its discretion, hear appeals from the federal Court of Appeals and appeals from a state’s highest court when the legal dispute involves a federal law. Because the U.S. Supreme Court is the highest-level court in the federal court system, it has national jurisdiction. In other words, all federal circuit and district courts are bound to its decisions. Additionally, Supreme Court rulings are binding precedent on state courts when a case involves a federal law issue. For example, a U.S. Supreme Court decision involving a free speech issue under the First Amendment of the U.S. Constitution, which is federal law, is binding on state courts.

State Courts

Most state court systems are structured like the federal court system in that they have three levels of courts: trail court, intermediate appellate court, and a final appellate court. There are some states, however, that have only two levels of courts. States vary in the names they give to their courts, but the courts function similarly as the federal system. For instance, the state’s highest-level court (named the “Supreme Court” in some states) binds all lower courts, and the intermediate appellate courts bind all trial courts. Importantly, however, state courts bind only the courts within the geographical boundaries of their state. Therefore, a decision by the Indiana Supreme Court would only bind courts within Indiana, not state courts in another state.

There are some instances, however, where state law issues are litigated in federal courts. When this occurs, interpretations of the state law by the state’s highest court are considered binding precedent on the federal court interpreting the state law. For example, if a plaintiff files a lawsuit in federal court that involves a federal law issue and a Montana state law issue, the federal judge is bound to the Montana Supreme Court’s interpretations of the state law when making a ruling on the case.


Because of the duel sovereignty structure of the U.S. legal system, the federal government and each state government has their own court system. Each court system operates under the common law system, which is based on precedents. Generally, courts are only required to follow binding precedent and can disregard persuasive precedent. Prior court decisions are binding on a court if it was decided by a higher-level court within the same jurisdiction. Under the federal court system—and most state court systems—legal decisions of the final appellate court (U.S. Supreme Court) are binding on the trial courts (U.S. District Courts) and the intermediate appellate courts (U.S. Circuit Court of Appeals). Decisions of the intermediate appellate courts are only binding on the lower-level trial courts within its jurisdiction, and trail court decisions are not being on any other court, even on courts located within the same jurisdiction. With the exception of the U.S. Supreme Court, federal court decisions are never binding on state courts. Legal decisions of a state’s highest-level court are only binding on lower state courts located within its geographical boundaries, and in certain instances, on federal courts when presiding over a case that involves a state law issue.


To read the other articles in the NALC’s “Procedure” series, click here.