Key Points

  • The Arizona Court of Appeals held that sanctions under Arizona Rule of Civil Procedure 68(g) are substantive and preempted by federal law in FELA cases tried in state court.
  • The court rejected BNSF's argument that the sanctions are procedural because they are imposed after judgment, holding that the test is whether a rule alters the recovery available under FELA.
  • The court reasoned that Rule 68 sanctions could reduce a FELA plaintiff's total recovery and are therefore too substantial a part of potential liability to be procedural under Monessen Southwest Railway Co. v. Morgan.
  • The court affirmed the jury verdict for BNSF, holding that evidence Carter repeatedly walked through an oil leak supported a permissible contributory-negligence defense even if it also bore on the barred assumption-of-risk defense.
  • The court held that any error in admitting evidence of an anonymous tip about a trampoline-park injury was harmless and upheld the admission of probation-status testimony and a perjury question.

A railroad that defeats a worker's federal injury suit in an Arizona court cannot collect the state's offer-of-judgment sanctions from the worker, the Arizona Court of Appeals held Nov. 3, because those penalties are substantive and therefore displaced by federal law.

BNSF Railway Co. kept the jury verdict it won against Marvin Carter II, an engineer who said he slipped in leaked oil on a locomotive in Kingman and injured his knee. But the three-judge panel also upheld the trial court's refusal to sanction Carter for rejecting BNSF's settlement offers.

Judge O'Neil wrote the opinion for Division Two of the court, joined by Presiding Judge Gard and Judge Eckerstrom. Under the ruling, Arizona courts cannot apply the state's Rule 68(g), which penalizes a party who turns down an offer of judgment and then does no better at trial, in cases under the Federal Employers' Liability Act. That statute, known as FELA, creates a federal claim for workplace injuries in the railroad industry.

State courts hearing FELA claims use their own procedural rules but must apply federal substantive law, the court explained.

BNSF made Carter offers of judgment in December 2021, April 2022 and January 2023. After a seven-day trial ended in a defense verdict, the railroad sought sanctions under both the current and earlier versions of Rule 68. The current rule requires a party who rejects an offer and does not obtain a more favorable judgment to pay 20 percent of the difference between the offer and the final judgment.

Judge Randall H. Warner of Maricopa County Superior Court denied the request, relying in part on Boyd v. BNSF Railway Co., a 2016 Minnesota Supreme Court decision. Boyd held preempted a state rule imposing added costs on a defendant who refused a plaintiff's settlement offer, because applying it would have "create[d] a disparity in FELA cases based solely on whether the plaintiff's claim is brought in federal or state court."

On appeal, BNSF argued that Boyd misapplied the requirement that FELA claims be adjudicated uniformly. The railroad contended that although FELA relief must be uniform, uniformity "does not require disregard for state post-judgment procedures." It likened sanctions to postjudgment interest, citing case law, including the U.S. Supreme Court's decision in Monessen Southwest Railway Co. v. Morgan, treating prejudgment interest as substantive and postjudgment adjustments as procedural.

"That framing overly focuses on the timing of the monetary consequence either before or after judgment," O'Neil wrote. The question, the court said, is whether a rule affects the parties' substantive FELA rights or merely regulates the process for enforcing them. Prejudgment interest is substantive because it is meant to make the plaintiff whole, the opinion said, not because of when it accrues.

By contrast, the court wrote, state rules have been treated as procedural when they control postjudgment processes that do not alter a party's recovery. It cited a 1916 Supreme Court decision approving a state rule that imposed a 10 percent charge on a party who posted a supersedeas bond, a bond that suspends a judgment during an appeal, if the judgment was affirmed. That rule "served to enforce the prevailing party's recovery as established in the judgment and did not redefine the nature and extent of that recovery," O'Neil wrote.

Rule 68 sanctions fall on the other side of that line, the panel held, because they are "too substantial a part of a [party's] potential liability" to be classified as procedural, a phrase drawn from Monessen. The rule's effect, O'Neil wrote, can "significantly alter the recovery available under FELA." Had the jury found for Carter but awarded less than BNSF offered, the court explained, the sanctions would have reduced his total recovery.

The court left open whether FELA itself authorizes comparable sanctions, noting that BNSF did not argue the trial court could have imposed them under federal law.

Carter argued that BNSF built its case on assumption of risk, a common-law defense that an employee accepted the known dangers of the job, which FELA bars. The statute does allow contributory negligence, the defense that a worker's own carelessness added to the danger, which reduces damages in proportion to fault rather than barring recovery.

Carter testified that he had walked through the oil five times before slipping, and BNSF presented evidence that he could have avoided it by leaving the locomotive by a staircase at its "nose" end. The panel held that this evidence supported a permissible contributory-negligence defense. Carter's "decision to repeatedly walk through the oil was relevant to his own negligence regardless of any theory concerning assumption of risk," O'Neil wrote.

The panel turned aside Carter's challenge to evidence of an anonymous letter BNSF received, which read: "Marvin Carter did not get hurt at work! He got hurt at a trampoline park in Las Vegas on the day before." The court did not decide whether allowing evidence of the tip was error. Any prejudice "was negligible in the context of this trial and did not affect Carter's substantial rights," the court held.

Other trampoline-park evidence carried far greater weight, the panel reasoned. Carter acknowledged visiting the park three days before the claimed workplace injury, and his phone records showed a call, more than an hour after he entered, to the office of the surgeon who had operated on his knee in 2004.

The court also upheld testimony that Carter had been on "active Level S" probation at work, which BNSF offered to show a motive to falsely claim a workplace injury, and a cross-examination question asking whether he had perjured himself in a 2023 Mohave County proceeding. Carter said no, and "the only evidence the jury heard was Carter's statement that he had not perjured himself," the court wrote.

Lawyers for Carter included Mark P. Breyer of Breyer Law Offices P.C. Lawyers for BNSF included Susan M. Freeman of Womble Bond Dickinson LLP.

The panel affirmed on both the appeal and the cross-appeal. It awarded no costs, because neither party entirely prevailed on appeal.