## Facts

- Alan and Cara Woods sued Burlington Northern Railroad Company in federal district court in Alabama under diversity jurisdiction for injuries arising from a motorcycle accident.
- A jury returned a money judgment exceeding \$300,000 in the Woodses’ favor.
- Burlington appealed to the Eleventh Circuit and obtained a stay of execution by posting a supersedeas bond.
- The Eleventh Circuit affirmed the money judgment without substantial modification and, applying an Alabama statute, imposed a mandatory 10% affirmance penalty because Burlington had stayed the judgment by bond.
- The Supreme Court granted review to determine whether the state mandatory penalty applies in federal diversity appeals.

## Issues

1. Whether, in a federal diversity case, an Alabama statute requiring a mandatory 10% affirmance penalty for stayed money judgments applies in the court of appeals.
2. Whether Federal Rule of Appellate Procedure 38 (and 28 U.S.C. § 1912) conflicts with and displaces the Alabama mandatory penalty scheme.

## Decision

- The Supreme Court reversed the Eleventh Circuit’s imposition of the Alabama 10% penalty.
- The Court held that the Alabama mandatory affirmance penalty statute does not apply to judgments entered by federal courts sitting in diversity.
- The Court left undisturbed the underlying affirmance of the Woodses’ money judgment; only the penalty component was invalidated.

## Legal Principles

- When a Federal Rule of Appellate Procedure is valid under the Rules Enabling Act and the Constitution and directly conflicts with a state rule, the federal rule governs in federal court, including in diversity cases.
- Federal Rule of Appellate Procedure 38 gives courts of appeals discretion to award damages and costs for frivolous appeals; a state law that mandates a fixed penalty upon affirmance conflicts with that discretionary federal regime.
- Rule 38 is procedural because it regulates appellate sanctions and the conduct of appellate litigation, and it does not impermissibly affect substantive rights within the meaning of 28 U.S.C. § 2072.
- Rule 38, together with 28 U.S.C. § 1912’s authorization of “just damages” and costs upon affirmance, creates a flexible federal sanction scheme that leaves no room for a mandatory state affirmance penalty in federal appellate practice.

## Conclusion

Federal appellate courts in diversity cases apply the discretionary sanction framework of Federal Rule of Appellate Procedure 38 and 28 U.S.C. § 1912, not a state statute that mandates a fixed affirmance penalty for appellants who stayed a money judgment by bond.


Burlington N. R.R. Co. v. Woods, 480 U.S. 1 (1987)