Burlington Northern v. Woods
Burlington Northern R. Co. v. Woods, 480 U.S. 1 (1987) addressed the issue of an alleged conflict between an Alabama law on automatic penalties for unsuccessful appeals with FRAP 38 which disallowed such penalties unless the appellate court found the appeal frivolous. Following an unsuccessful appeal by defendants from a judgment for the plaintiffs, the plaintiffs moved for “imposition of the State’s mandatory affirmance penalty of 10% of the amount of judgment” but the state penalty was challenged by the defendants as “a procedural rule … inapplicable in federal court under the doctrine of Erie … and its progeny.” The Court had to both assess the degree of conflict between the two rules and determine whether FRAP 38 could be classified as procedural.
Justice Marshall, writing for the Court, first set out the two-part test to be applied as articulated in Hanna:
“In Hanna … we set forth the appropriate test for resolving conflicts between state law and the Federal Rules. The initial step is to determine whether, when fairly construed, the scope of Federal Rule 38 is ‘sufficiently broad’ to cause a ‘direct collision’ with the state law or, implicitly, to ‘control the issue’ before the court, thereby leaving no room for the operation of that law. … The Rule must then be applied if it represents a valid exercise of Congress’ rulemaking authority, which originates in the Constitution and has been bestowed on this Court by the Rules Enabling Act.”
On the issue of Hanna’s required “direct collision”:
“Applying the Hanna analysis to an analogous Mississippi statute which provides for a mandatory affirmance penalty, the United States Court of Appeals for the Fifth Circuit concluded in Affholder, Inc. v. Southern Rock, Inc., 746 F.2d 305 (1984), that the statute conflicted with Rule 38 and thus was not applicable in federal diversity actions. The Fifth Circuit discussed two aspects of the conflict: (1) the discretionary mode of operation of the Federal Rule, compared to the mandatory operation of the Mississippi statute, and (2) the limited effect of the Rule in penalizing only frivolous appeals or appeals interposed for purposes of delay, compared to the effect of the Mississippi statute in penalizing every unsuccessful appeal regardless of merit. … We find the Fifth Circuit’s analysis persuasive. Rule 38 affords a court of appeals plenary discretion to assess ‘just damages’ in order to penalize an appellant who takes a frivolous appeal and to compensate the injured appellee for the delay and added expense of defending the district court’s judgment. Thus, the Rule’s discretionary mode of operation unmistakably conflicts with the mandatory provision of Alabama’s affirmance penalty statute. Moreover, the purposes underlying the Rule are sufficiently coextensive with the asserted purposes of the Alabama statute to indicate that the Rule occupies the statute’s filed of operation so as to preclude its application in federal diversity actions.”
On the issue of the proper classification of FRAP 38:
“Federal Rule 38 regulates matters which can reasonably be classified as procedural, thereby satisfying the constitutional standard for validity. Its displacement of the Alabama statute also satisfies the statutory constraints of the Rules Enabling Act. The choice made by the drafters of the Federal Rules in favor of a discretionary procedure affects only the process of enforcing litigants’ right and not the rights themselves.”
Ultimately, the Court held that “the Alabama mandatory affirmance penalty statute has no application to judgments entered by federal courts sitting in diversity” and reversed the award of the 10% penalty.