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7. Is the appellate court required to impose the 15% penalty?
The Federal Rules of Appellate Procedure permit an appellate court to punish frivolous appeals by assessing extra costs. Under State A law, there is an automatic 15% penalty to an unsuccessful appeal of an award of money damages.
A teacher brought a successful lawsuit against a charter school in State A federal court. The judge found that the charter school had violated federal employment laws and awarded money damages to the teacher in the amount of $182,000. The charter school appealed and lost.
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When determining whether to do an Erie analysis, the threshold question is whether there is a controlling Federal Rule or federal statute. If any federal law controls (is «on point»), there is no Erie problem. However, in the absence of a controlling federal statute or Rule, the question becomes whether the issue at hand is substantive or procedural.
In the Erie decision, the U.S. Supreme Court held that a federal court sitting in diversity must apply state substantive law of the state in which it sits on all substantive issues in a case. This includes the state's conflict of law rules. For all procedural issues, a federal court sitting in diversity must apply federal procedural rules (the FRCP).
Exam tip: When a potential Erie analysis arises on the MBE, pay close attention to the facts. If the court is not sitting in diversity and is exercising federal question jurisdiction, federal law will apply and there is no need to examine applicable state law.
D is correct. This is a federal question case as it arises under federal employment laws. Because this is not a diversity lawsuit, no Erie analysis is necessary. Only federal law applies, so the court may only use the Federal Rule of Appellate Procedure (FRAP), not the State A law penalty.
A is incorrect. Because this is a federal question lawsuit, the federal court must apply federal law, not the law of the state in which it sits. The fact that the federal court is situated in State A does not mean that State A law applies.
B is incorrect. This raises the issue of substantive versus procedural issues, which implies that this requires an Erie analysis. However, this is not an Erie problem as the court's jurisdiction is based on a federal question, and only federal law applies.
C is incorrect. This choice assumes it is necessary to examine the state law here, but that's incorrect. As a federal question case, the state law is irrelevant, so there can be no conflict to resolve. Only federal law applies, as explained above.