CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES

AT

OCTOBER TERM, 1986

BURLINGTON NORTHERN RAILROAD CO. v.
WOODS ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

No. 85-1088. Argued November 4, 1986-Decided February 24, 1987 An Alabama statute requires an appellate court, upon affirming a money judgment without substantial modification, to impose a 10% penalty on any appellant who had obtained a stay of that judgment by executing a bond. The statute's purposes are to penalize frivolous appeals and those interposed for delay, and to provide appellees with additional compensation for having to suffer the ordeal of appeal. Upon affirming without modification a judgment for respondents in their federal diversity action arising from a motorcycle accident, the Eleventh Circuit imposed the Alabama statute's penalty on petitioner, which had posted bond to stay the judgment pending appeal.

Held The Alabama mandatory affirmance penalty statute has no application to judgments entered by federal courts sitting in diversity. Pp. 3-8.

(a) Rule 38 of the Federal Rules of Appellate Procedure affords federal courts of appeals plenary discretion to award damages to an appellee upon determining that the appeal is frivolous. Federal Rule 38's discretionary mode of operation conflicts with the Alabama statute's mandatory operation. Furthermore, the purposes underlying Rule 38-to penalize frivolous appeals and to compensate injured appellees for the delay and added expense inherent therein—are sufficiently coextensive with the statute's purposes to indicate that the Rule occupies the statute's field of operation. The fact that Alabama has a similar Appel

late Rule coexisting with the statute does not mean that a federal court could impose the mandatory statutory penalty while remaining free to exercise its Federal Rule 38 discretionary authority, since the statute would improperly limit the exercise of that discretion in instances in which the court wished to impose a penalty of less than 10%. Pp. 4-8. (b) Rule 38 must be applied under the analysis set forth in Hanna v. Plumer, 380 U. S. 460, since (a) it is a constitutional exercise of rulemaking authority in that it regulates matters that can reasonably be classified as procedural, and (b) it affects only the process of enforcing litigants' rights and not the rights themselves, and therefore does not violate the Rule Enabling Act's prohibition against affecting substantive rights (28 U. S. C. § 2072). P. 8.

Reversed.

MARSHALL, J., delivered the opinion for a unanimous Court.

L. Vastine Stabler, Jr., argued the cause and filed briefs for petitioner.

James O. Haley argued the cause for respondents. With him on the brief were John W. Haley and Francis W. Hare, Jr.*

JUSTICE MARSHALL delivered the opinion of the Court.

This case presents the issue whether, in diversity actions, federal courts must apply a state statute that imposes a fixed penalty on appellants who obtain stays of judgment pending unsuccessful appeals.

I

Respondents brought this tort action in Alabama state court to recover damages for injuries sustained in a motorcycle accident. Petitioner removed the case to a Federal District Court having diversity jurisdiction. A jury trial resulted in a judgment of $300,000 for respondent Alan Woods and $5,000 for respondent Cara Woods. Petitioner posted bond to stay the judgment pending appeal, and the Court of Appeals affirmed without modification. 768 F. 2d 1287 (CA11 1985).

*Ellis J. Horvitz and Peter Abrahams filed a brief for the Association of Southern California Defense Counsel as amicus curiae.