Opinion
No. C-97-1723 WHO
March 7, 2001
MEMORANDUM DECISION AND ORDER
In this action brought by plaintiff and counterdefendant Eaton Corporation ("Eaton") against defendants and counterclaimants Signal Technology Microwave Products Corporation ("ST Microwave") and Signal Technology Corporation (jointly "Signal"), a jury verdict has been entered in favor of Eaton, in the amount of $4,229,254. Defendants now move for a partial new trial, pursuant to Rule 59(a) of the Federal Rules of Civil Procedure. Eaton moves to amend and alter the judgment, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. For the reasons set forth below, defendants' motion for a partial new trial is denied, and Eaton's motion to amend and alter the judgment is granted in part.
I.
In this action, Eaton sought contractual indemnification for environmental remediation costs associated with a property that Eaton formerly leased at 680 West Maude Street, in Sunnyvale, California ("the Site"). After a jury trial, the jury returned a verdict for Eaton in the amount of $4,299,254.
II.
Defendants now move for a partial new trial, pursuant to Rule 59(a) of the Federal Rules of Civil Procedure.
A.
Rule 59(a) of the Federal Rules of Civil Procedure provides, in relevant part:
A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States[.]
The Court may grant a motion for a new trial, even if the verdict is supported by substantial evidence, "if the verdict is against the clear weight of the evidence." Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th Cir. 1987). "The judge can weigh the evidence and assess the credibility of witnesses, and need not view the evidence from the perspective most favorable to the prevailing party." Id. (citations omitted)
"On the other hand, a decent respect for the collective wisdom of the jury, and for the function entrusted to it in our system, certainly suggests that in most cases the judge should accept the findings of the jury, regardless of his own doubts in the matter. . . . If, having given full respect to the jury's findings, the judge on the entire evidence is left with the definite and firm conviction that a mistake has been committed, it is to be expected that he will grant a new trial."
Id. at 1371-72 (footnotes omitted) (citations omitted) (quoting 11 C. Wright A. Miller, Federal Practice Procedure § 2806 at 48-49 (1973)). "Doubts about the correctness of the verdict are not sufficient grounds for a new trial: the trial court must have a firm conviction that the jury has made a mistake." Id. at 1372 (citation omitted)
B.
Defendants' first argument for a partial new trial is that the jury erred when it found that Eaton provided defendants with proper and timely notice of the May 8, 1995 Tentative Site Cleanup Order from the California Regional Water Quality Control Board ("Water Board Order"). Thus, defendants contend that they are not liable for any of Eaton's costs resulting from its compliance with the Water Board Order. Defendants seek either a new trial on the adequacy of Eaton's notice of the Water Board Order to defendants or a remittitur in the amount of $1,233,125.
1.
Eaton contends that the Court never should have submitted the issue of notice to the jury in the first place, because the Court had already granted summary judgment for Eaton on liability. Eaton contends that the only issue remaining to be tried was the amount of damages.
The summary judgment briefing was directed largely at interpreting the complex language of the Purchase and Sale Agreement by which Eaton sold its Microwave Products Division to ST Microwave. The primary issues were: (1) whether defendants agreed, under the terms of the Purchase and Sale Agreement, to assume any liabilities associated with Eaton's semiconductor manufacturing activities; and (2) if defendants did assume those liabilities, whether Eaton was equitably estopped from enforcing that portion of the Purchase and Sale Agreement. Neither side addressed whether Eaton gave defendants proper notice of the liabilities at issue, nor did they brief the amount of damages.
In the Court's original summary judgment decision, it granted summary judgment for defendants. (Mem. Decision and Order filed Nov. 26, 1998.) The Court found that defendants had agreed to assume liabilities associated with Eaton's semiconductor manufacturing activities, but that Eaton was equitably estopped from enforcing that portion of the agreement. The Court also found that defendants did not agree to assume any liabilities associated with the conduct of Signetics Corporation ("Signetics").
The Ninth Circuit reversed this Court's conclusion that Eaton was subject to equitable estoppel, and directed it to enter summary judgment for Eaton. The Ninth Circuit did not discuss this Court's conclusions with respect to Signetics. On August 4, 2000, this Court ordered that:
Summary judgment is granted for Eaton on all of its claims against defendants, and defendants' cross-motion for summary judgment is denied, except that defendants are not liable for Signetics Company's share of the settlement of Sunnyvale Research Plaza Assocs. v. Data General Corp., or for any environmental contamination at 680 West Maude Street in Sunnyvale, California that was caused by Signetics Company.
(Order filed Aug. 4, 2000 at 2:5-11.) On November 21, 2000, the Court granted summary judgment for Eaton on defendants' counterclaims, and held that "[t]he sole issue remaining for trial is the amount of money that defendants owe Eaton." (Mem. Decision Order filed Nov. 21, 2000 at 13:6-7.)
In order to determine the amount of money that defendants owed Eaton, it was necessary to determine at trial whether Eaton gave defendants proper notice of each item of damages that it sought, as required by the Purchase and Sale Agreement. In addition, in Globe Indemnity v. Schmitt, 53 N.E.2d 790, 794 (1944), the Ohio Supreme Court held that "the one seeking indemnity, after making voluntary settlement, must prove that he has given proper and timely notice to the one from whom it is sought[.]" In its summary judgment briefing, Eaton did not attempt to prove that it gave proper and timely notice to defendants. As Eaton could not show that it was entitled to damages without showing that it gave proper and timely notice to defendants, the issues of notice and the amount of damages to which Eaton was entitled were properly submitted to the jury at trial.
2.
The Purchase and Sale Agreement defines the form of notice that was required to be given. Section 11.3 provides, in relevant part:
The indemnifications contained herein are conditional upon the following: If any action, suit or other proceeding shall be commenced, or other claims, demands or assessments be asserted, against either party in respect to which such party ("Indemnitee") proposes to demand indemnification hereunder, the party from whom indemnification is sought ("Indemnitor") shall be notified to that effect with reasonable promptness and informed in reasonable detail of the grounds for such demand.
(Pl.'s Tr. Ex. 6, Purchase and Sale Agreement § 11.3 at 96.) Section 12.3 provides:
Any notices or other communications required or permitted hereunder shall be given in writing and shall be sufficiently given when received after being delivered personally or sent by telecopy or by registered mail or certified mail, return receipt registered, postage prepaid, addressed as follows:
To Buyer: c/o Signal Technology Corporation 60 Winter Street Weymouth, Massachusetts 02188
Attention: William E. Cook, President
With a copy to:
Harry R. Hauser, Esq. Gadsby Hannah One Post Office Square Boston, Massachusetts 02109
(Id. § 12.3 at 98.)
Defendants concede that Eaton gave proper written notice of the Sunnyvale Research Plaza Associates ("SRPA") action. That written notice informed defendants that the complaint in the SRPA action sought "damages relating to certain environmental contamination allegedly existing in and about the real property located at 505 and 555 North Mathilda Avenue, and 465 West Maude Avenue in Sunnyvale, California." (Pl.'s Tr. Ex. 23 at 1.) It also informed defendants that "[i]t is Eaton Corporation's position that under the Purchase and Sale Agreement by and between Eaton Corporation and Signal Technology Microwave Products Corporation dated June 13, 1989, and Agreement and Mutual Release dated December 2, 1991, responsibility for this alleged contamination clearly rests with ST Microwave Corp[.]" (Id.)
It is also undisputed that Eaton did not give defendants written notice of the Water Board Order that complied with the requirements of the Purchase and Sale Agreement. Eaton did, however, discuss the Water Board Order with defendants, and was again told that defendants believed they had no contractual liability to indemnify Eaton for the environmental contamination at the Site.
The Court denied defendants' motion for judgment as a matter of law because the jury could have concluded that the written notice of the SRPA action submitted to defendants all costs incurred by Eaton that were associated with the environmental contamination at the Site, including costs incurred as a result of the Water Board Order. Indeed, the jury did find that proper notice was given of the Water Board Order. (Special Verdict, Answer to Question 1.) That finding was not against the clear weight of the evidence, as it cannot be disputed that the same environmental contamination was at issue in both the SRPA lawsuit and the Water Board Order. For this reason alone, there is no reason to grant a new trial on the issue of notice.
Defendants' reliance on two district court cases is misplaced. In Ohio Casualty Insurance Co. v. Ford Motor Co., 443 F. Supp. 80 (S.D. Ohio 1977), the court found that notice of a claim by one party did not give notice of claims by four other parties, even though all claims arose out of the same automobile accident. Id. at 82. Here, a claim by only one party, Eaton, is at issue, and both the SRPA action and the Water Board Order addressed Eaton's liability for the same environmental contamination. Nothing in Ohio Casualty precluded the jury from finding that notice of the environmental liabilities in the SRPA action also constituted notice of the same environmental liabilities in the Water Board Order. Defendants also rely on an unpublished district court opinion from the Southern District of New York in which the court applied Ohio law. In that case, the court held that actual notice was not sufficient when written notice was required by contract. Here, defendants concede that Eaton gave proper written notice of the SRPA action, and the issue is only whether that notice was also sufficient to give notice of the Water Board Order, which addressed the same environmental contamination.
The Court also agrees with Eaton that, as a matter of law, once defendants refused to indemnify Eaton for the SRPA lawsuit, there was no need for Eaton to give additional written notice for every element of damages incurred as a result of the environmental contamination at the Site. By refusing to indemnify and defend Eaton against the SRPA action, defendants repudiated their indemnification obligations under the Purchase and Sale Agreement. "[W]here a party's repudiation contributes materially to the non-occurrence of a condition * * * the condition is excused." Livi Steel, Inc. v. Bank One, Youngstown, N.A., 584 N.E.2d 1267, 1269 (Ohio Ct.App. 1989) (quoting Restatement of the Law 2d, Repudiation (1981), Section 255). "The rationale behind this legal maxim is that no one should be required to perform a futile act." Id. at 1270. When Eaton gave written notice of the SRPA action to defendants, defendants refused to indemnify Eaton on the ground that they had no contractual duty to indemnify Eaton for environmental contamination at the Site. As defendants had already repudiated their duty to indemnify Eaton, it would have been a futile act for Eaton to provide written notice to defendants of the Water Board Order. Thus, even if Eaton did have a contractual duty to provide a separate written notice of the Water Board Order, that duty was excused by defendants' repudiation of their duty to indemnify Eaton.
The Court also rejects defendants' argument that Eaton made an improper closing argument to the jury on the issue of notice. The Court overruled Eaton's objection during the closing argument, and does so again now. The Court specifically instructed the jury that none of the comments of the lawyers were evidence.
Accordingly, defendants' motion for a new trial on the issue of whether they received proper notice of the Water Quality Board Order is denied.
C.
Defendants' second argument for a partial new trial is that the jury's conclusion that Eaton was 50 percent liable for the environmental contamination at the Site was against the clear weight of the evidence. Defendants contend that Eaton did not offer any evidence from which the jury could have concluded that Eaton was 50 percent liable for the environmental contamination at the Site.
The Court instructed the jury that Eaton had the burden of proving the percentage of the settlement that was attributable to Signetics' liability for the environmental contamination at the Site, and the percentage that was attributable to Eaton's liability. Defendants correctly point out that Eaton's own witnesses, Victor Leo and George Linkletter ("Linkletter") testified that they could not calculate the percentage of liability attributable to Eaton. Eaton submitted expert opinion from Linkletter in the SRPA action that it was not liable at all for the environmental contamination. Linkletter also testified at trial in this action that he still believed that Signetics was liable for the environmental contamination at the Site.
The jury also had before it, however, the Water Board Order, in which the Water Board discussed problems with trichloroethene disposal by both Eaton and Signetics. (See Pl.'s Tr. Ex. 88.) The Water Board found "Eaton Corporation and Signetics Corporation as primary dischargers" and that "Eaton and Signetics are primarily responsible for meeting the requirements of this order." (Id. at 3.) The Water Board Order did not, however, state that Eaton and Signetics were equally liable for the contamination.
Nonetheless, there was evidence of trichloroethene leaks by both Signetics and Eaton at the Site. The judge in the SRPA action rejected Signetics' contention that it was only minimally liable for the contamination, and denied Signetics' motion for a good-faith settlement. The Water Board found both Signetics and Eaton to be the primary dischargers, but there was testimony that the Water Board was reluctant to add Signetics to the order at all. Even though none of the witnesses was able to quantify the percentage of liability as between Eaton and Signetics, the jury could reasonably resolve the conflicting evidence by concluding that Eaton and Signetics were equally liable for the environmental contamination at the Site. The Court is not concerned that Eaton submitted expert opinion evidence in the SRPA action, and at trial in this action, that it was not liable at all. The jury properly could have given more weight to the findings of the Water Board and the judge in the SRPA action, than to Eaton's expert testimony, as those findings were the only neutral evidence in the record. Accordingly, the Court finds that the jury's conclusion that Eaton was 50 percent liable for the contamination at the Site was not against the clear weight of the evidence. Defendants' motion for a partial new trial is denied.
III.
Eaton moves to amend or alter the judgment, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure.
Rule 59(e) provides: "Any motion to alter or amend a judgment shall be filed no later than 10 days after entry of the judgment." A Rule 59(e) motion "`should not be granted, absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law.'" McDowell v. Calderon, 197 F.3d 1253, 1255 (9th Cir. 1999) (en banc) (footnote omitted) (quoting 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999) (citing School Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993)). Eaton's motion is based on the allegation that the Court committed clear error, in five respects.
A.
Eaton's first argument is that the Court erred by submitting Question No. 4 of the Special Verdict to the jury. Question No. 4 asked: "What percentage of the environmental contamination that was the subject of the SRPA lawsuit did Eaton prove was caused by its own conduct?" Eaton has argued repeatedly that it did not have the burden of apportioning liability between Eaton and Signetics. The Court has rejected this argument over and over again, and rejects it again now without further discussion.
B.
Eaton's second argument is that even if Question No. 4 was appropriate, the jury should not have reduced both of Eaton's settlement payments in the SRPA action by fifty percent.
The jury verdict of $4,229,254 was $491,911 less than the amount of damages that Eaton had requested. The total amount that Eaton claimed it spent to settle the SRPA action on behalf of itself and Signetics was $983,822, which included a $275,000 payment on behalf of Eaton, an unapportioned $700,000 payment on behalf of Eaton and Signetics, and $8,822 in arbitration fees. The jury found that Eaton was 50 percent liable for the environmental contamination that was the subject of the SRPA lawsuit. Fifty percent of the total amount that Eaton paid to settle the SRPA lawsuit is $491,911, which accounts for the entire difference between the amount of damages Eaton requested and the amount that it was awarded.
Eaton contends that the jury erroneously deducted from its damage award 50 percent of the $275,000 that Eaton paid on its own behalf to settle the SRPA lawsuit, because the jury was instructed that none of that amount was paid on behalf of Signetics. Eaton correctly notes that the jury asked a question on how to apply the liability percentage to damages. Accordingly, Eaton contends that the jury verdict should be amended upwards by $137,500 (half of the $275,000 settlement).
Eaton's argument is logical and perfectly plausible. Defendants correctly argue, however, that the Court cannot speculate about the items of damages that the jury actually awarded. The Special Verdict did not require the jury to itemize damages. Instead, it simply asked the jury to enter the amount of money that "will fairly and reasonably compensate Eaton for the damages it suffered as a result of Signal's breach of the contract[.]" (Special Verdict, Question No. 5.) Because the jury did not itemize damages, there is no way for the Court to determine what items of damages it actually awarded.
Defendants are correct that the Court must presume that its instructions to the jury were followed, absent a showing to the contrary. Lange v. Penn Mut. Life Ins. Co., 843 F.2d 1175, 1184 (9th Cir. 1988) (citing Husky Refining Co. v. Barnes, 119 F.2d 715 (9th Cir. 1941)). The Court cannot speculate as to what elements of damages were awarded, where there is no evidence of the jury's findings. Id. Accordingly, the Court denies Eaton's motion to amend the judgment upward by $137,500.
C.
Eaton's third argument for amending the judgment is that it is entitled to a declaratory judgment that Signal is liable for amounts that Eaton will incur in the future as a result of the Water Board Order. Specifically, Eaton seeks to amend the judgment to provide:
Eaton is entitled to continuing reimbursement for all reasonable costs and expenses, including, but not limited to, consultants and attorneys' fees for ongoing and future compliance with the California Regional Water Quality Control Board Orders, regarding remediation of contamination emanating from 680 W. Maude in Sunnyvale, California for as long as Eaton's obligations with respect to those orders continue. The specific procedures and requirements relating to Signal's future obligations will be the subject of a separate consent judgment or other appropriate legal mechanism entered into between Signal and Eaton, which will eliminate the need for Eaton to seek separate court orders in the future in order to enforce this aspect of the Judgment.
(Mem. in Supp. of Eaton's Mot. to Amend and Alter J. at 4.) Defendants' only argument against this part of Eaton's motion is that the Court should grant defendants' motion for a new trial on the issue of its liability for costs Eaton incurred to comply with the Water Board Order. At oral argument, defendants conceded that if the Court does not grant their motion for a new trial, Eaton is entitled to a declaratory judgment establishing defendants' liability for future cleanup costs. The Court has already rejected defendants' motion for a new trial, as explained earlier in this Memorandum Decision and Order.
The language of Eaton's proposed declaratory judgment, however, is inappropriate. The first sentence of Eaton's proposed declaratory judgment is imprecise, and the second sentence serves no purpose. It has been established, however, that Eaton is entitled to indemnity from defendants for 50 percent of the reasonable costs Eaton and Signetics have incurred and will incur in cleaning up the environmental contamination at the Site. Accordingly, Eaton's motion to amend the judgment to include a declaratory judgment with respect to future costs involved in cleaning up the environmental contamination is granted.
The Court will grant a declaratory judgment that:
Eaton is entitled to continuing reimbursement for 50 percent of the total reasonable costs and expenses, including, but not limited to, consultants' and attorneys' fees, incurred by Eaton and Signetics Corporation for ongoing and future compliance with the California Regional Water Quality Control Board orders regarding remediation of environmental contamination emanating from 680 W. Maude in Sunnyvale, California for as long as Eaton's obligations with respect to those orders continue.
D.
Eaton's fourth argument is that the judgment should be amended to include fees, costs, and expenses Eaton incurred from November 1, 2000 until actions in this Court are finally concluded. Eaton's counsel, Margaret C. Kelsey, attests that it has incurred $88,936.98 in fees, costs and expenses from November 1 through December 31, 2000. (Kelsey Decl. ¶¶ 4-8.)Defendants do not contest the dollar amount of Eaton's request, but contend that the request is untimely, for two reasons. First, defendants correctly note that Eaton insisted on trying the amount of fees to the jury as an element of contractual damages, rather than seeking them from the Court after trial. Defendants essentially contend that Eaton has waived its entitlement to fees incurred after November 1, 2000 because it did not submit those fees to the jury. Defendants' second argument is that the request for fees is untimely because it was filed more than fourteen days after entry of the judgment, in violation of Rule 54(d)(2)(B) of the Federal Rules of Civil Procedure and Civil Local Rule 54-4(a).
The Court's decision to submit the issue of fees and costs to the jury was based on Rule 54(d)(2)(A) of the Federal Rules of Civil Procedure. That rule provides: "Claims for attorneys' fees and related non-taxable expenses shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial." The advisory committee notes state that motions for attorneys' fees are not appropriate when the fees are "recoverable as an element of damages, as when sought under the terms of a contract; such damages typically are to be claimed in a pleading and may involve issues to be resolved by a jury." Fed.R.Civ.P. 54, advisory committee notes, 1993 Amend. Here, of course, fees were provided for under the terms of the parties' contract. Accordingly, the Court permitted Eaton to submit those fees to the jury.
As Eaton's fees were an element of damages to be proved at trial, the fourteen-day deadline, set forth in Rule 54(d)(2)(B) and Civil Local Rule 54-5, for filing a post-judgment motion for attorneys' fees does not apply. Accordingly, Eaton's request for a supplemental fee award was not untimely simply because it was filed sixteen days after entry of judgment.
Eaton did not waive its entitlement to further fees just because it did not submit all fees to the jury. Certainly, with respect to fees incurred after trial, there can be no possibility of waiver, because Eaton could not have known what those fees would be during trial. With respect to fees incurred between November 1, 2000 and the end of trial on December 14, 2000, Eaton expressly told the Court at trial that it intended to seek those fees by motion after trial. Defendants thus cannot claim to be surprised by Eaton's decision to file a motion for supplemental fees.
In discussing Rule 54(d)(2)(A), the Seventh Circuit has held that even when fees are sought as an element of damages, "[f]ees for work done during the case should be sought after decision, when the prevailing party has been identified and it is possible to quantify the award." Rissman v. Rissman, 229 F.3d 586, 588 (7th Cir. 2000) Similarly, the First Circuit has also held that the amount of fees sought pursuant to a contract may be determined by the Court after trial. McGuire v. Russell Miller, Inc., 1 F.3d 1306, 1316 (1st Cir. 1993). The court noted:
[A]lthough the judge can compute the amount of attorneys' fees after a trial with perfect hindsight, the jury would have to keep a running total of fees as they accrued through summations and then predict future fees from post-trial proceedings and motions. The prospect of such a trial evokes images of an attorney struggling to prove the amount of fees to which he is entitled, but never being able to do so because he must prove the value of his last words even as he speaks them, and also the value of words yet unuttered and unwritten.
Id. In both Rissman and McGuire, the party seeking fees did not present any part of its fees to the jury. Here, Eaton sought some of its fees from the jury, and now seeks to supplement those fees, as it stated it would do at the beginning of the trial. There is no reason why Eaton should be precluded from seeking the remainder of its fees from the Court in this post-trial motion to amend the judgment.
Defendants have not challenged the amount of the fees sought. Although Eaton has not submitted time sheets itemizing how the various fees, costs, and expenses were incurred, there is nothing about the amount sought that suggests to the Court, or apparently to the defendants, that the amount sought is unreasonable. Accordingly, Eaton's motion to amend the judgment to add $88,936.98 in attorneys' fees, costs, and expenses incurred between November 1 and December 31, 2000 is granted.
E.
Eaton's fifth argument is that the judgment should be amended to award Eaton $1,721,481.38 in prejudgment interest.
Defendants argue that Eaton's motion for prejudgment interest is untimely because under Ohio law a motion for prejudgment interest must be made and decided before entry of final judgment. Defendants rely upon a tort case, Mills v. City of Dayton, 486 N.E.2d 1209, 1212 (Ohio App. 1985). Mills was effectively overruled by the Ohio Supreme Court in Cotterman v. Cleveland Electric Illuminating Co., 517 N.E.2d 536 (Ohio 1987). There the Ohio Supreme Court held that motions for prejudgment interest in tort cases must be made within fourteen days after entry of judgment. Id. at 50. Later Ohio case law holds that this fourteen-day time limit for filing a motion for prejudgment interest does not even apply to contract actions, such as this lawsuit. Driscoll v. Norprop, Inc., 719 N.E.2d 48, 53 (Ohio App. 1998). In addition, the United States Supreme Court has held that a post-judgment motion for prejudgment interest is properly brought as a motion to amend or alter the judgment, pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. Osterneck v. Ernst Whinney, 489 U.S. 169, 175-76 and n. 3 (1989). As there does not appear to be a time limit under Ohio law for bringing a motion for prejudgment interest, and as Eaton filed its motion within the ten-day time limit set forth in Rule 59(e) of the Federal Rules of Civil Procedure (as calculated pursuant to Rule 6(a)), the Court finds that Eaton's motion for prejudgment interest is timely.
This case was tried under Ohio law.
Under Ohio law, prejudgment interest in a contract case is mandatory, regardless of whether the amount of the claim can be classified as liquidated, unliquidated, and even if the sum due was not capable of ascertainment until determined by the Court. Royal Elec. Constr. Corp. v. Ohio State Univ., 652 N.E.2d 687, 692 (Ohio 1995) (citing Ohio Rev. Code § 1343.03(A)). "[A] court need only ask one question: Has the aggrieved party been fully compensated?" Id.
An award of prejudgment interest encourages prompt settlement and discourages defendants from opposing and prolonging, between injury and judgment, legitimate claims. Further, prejudgment interest does not punish the party responsible for the underlying damages . . ., but, rather it acts as compensation and serves ultimately to make the aggrieved party whole.
Id. (citations omitted). "[T]o make the aggrieved party whole, the party should be compensated for the lapse of time between accrual of the claim and judgment." Id. See also Lincoln Elec. Co. v. St. Paul Fire Marine Ins. Co., 210 F.3d 672, 692-93 (6th Cir. 2000) (summarizing Ohio law on prejudgment interest). There is no doubt that Eaton is entitled to an award of prejudgment interest.
The trial court has the discretion to determine the date from which prejudgment interest should be calculated. Landis v. Grange Mut. Ins. Co., 695 N.E.2d 1140, 1142 (Ohio 1998); Lincoln, 210 F.3d at 692-93. Eaton contends that prejudgment interest should begin accruing on September 15, 1993, the date Eaton first tendered its claim for indemnification to defendants. As this is the first date that defendants received notice of Eaton's claim, it is an appropriate date to begin the calculation of prejudgment interest.
Eaton has submitted detailed interest calculations from an accountant, who attests that he calculated the accrual of prejudgment interest on each invoice, starting three months after the date of each invoice, unless he could ascertain the actual date the invoice was paid. (Werner Decl. ¶ 3.) Based on these calculations, Eaton seeks prejudgment interest in the total amount of $1,721,481.38. (Id. ¶ 4.)
Defendants do not challenge these calculations. Rather, they argue that no prejudgment interest should be awarded for the period of time from November 2, 1998, when this case was originally set for trial, and December 14, 2000, when the case actually concluded. Defendants argue that they should not be punished for this Court's error of law that caused this case to be delayed more than two years while the case was on appeal at the Ninth Circuit. Eaton contends that defendants act with "remarkable chutzpah" in asserting this argument.
Defendants rely upon Domestic Linen Supply Laundry Co. v. Kenwood Dealer Group, Inc., 672 N.E.2d 184 (1996). In that case, the trial court did not award prejudgment interest for the two-and-a-half year period of time between its entry of partial summary judgment and the final judgment after a bench trial. Id. at 186. The trial court explained that:
[I]nterest is being awarded from the date of breach until the date of this court's decision on summary judgment due to the creation of an erroneous law of the case. The entering of summary judgment did not change the evidence presented, but did include an additional issue. To charge the defendant with interest for the entire period from the time of the breach would be unjust.
Id. at 191 (quoting trial court opinion). The court of appeals affirmed, finding no abuse of discretion. Id.
Other Ohio cases have held an award of prejudgment interest should be awarded during procedural delays that were beyond the parties' control. In Westbrock v. Western Ohio Health Care Corp., 738 N.E.2d 799 (Ohio App. 2000) — a case cited by neither party — the defendant argued that it should not have to pay prejudgment interest during a nearly two-year period between the conclusion of a bench trial and the date the court finally issued its partial findings of facts and conclusions of law. Id. at 813. The court found that the plaintiffs should not be denied prejudgment interest during the court's long deliberations, because the defendants could have simply complied with their contract originally and avoided any need for the lengthy litigation. Id. at 814. The Ohio Supreme Court has also remarked, in discussing an award of prejudgment interest, that "it scarcely seems equitable that the denial of benefits contractually owed to another that led both parties on a lengthy and tortuous journey through the judicial system should redound to [the losing party's] benefit." Landis, 695 N.E.2d at 1142. The reasoning of the Westbrock and Landis opinions is more in line with the policy behind awards of prejudgment interest than that of the Domestic Linen opinion. Prejudgment interest is awarded to make the prevailing party whole for the lost use of their money during the time required to secure judgment. Lincoln, 210 F.3d at 692. Because prejudgment interest is intended to compensate Eaton for the loss of use of its money, there is no reason to deny prejudgment interest for the period of time this lawsuit was on appeal.
Defendants' final argument is that they should not be liable for prejudgment interest arising from Eaton's fees, costs, and expenses related to the Water Board Order. The jury has already determined that defendants are liable for those fees, costs, and expenses and this Court has found no reason to disturb that finding.
Eaton's motion to amend the judgment to include an award of prejudgment interest in the amount of $1,721,481.38 is granted.
IV.
Accordingly,
IT IS HEREBY ORDERED that:
1. Defendants' motion for a partial new trial is DENIED.
2. Eaton's motion to amend and alter the judgment is GRANTED IN PART:
a. Eaton's motion to amend the verdict upward by $491,911 in damages attributable to what it claims was the Court's erroneous submission to the jury of Question No. 4 of the Special Verdict is DENIED.
b. Eaton's motion to amend the verdict upward by $137,500 attributable to the jury's error in calculating damages attributable to the settlement of the SRPA action is DENIED.
c. Eaton's motion to amend the judgment to include a declaratory judgment is GRANTED. The Court will amend the judgment to include a declaratory judgment that:
Eaton is entitled to continuing reimbursement for 50 percent of the total reasonable costs and expenses, including, but not limited to, consultants' and attorneys' fees, incurred by Eaton and Signetics Corporation for ongoing and future compliance with the California Regional Water Quality Control Board orders regarding remediation of environmental contamination emanating from 680 W. Maude in Sunnyvale, California for as long as Eaton's obligations with respect to those orders continue.
d. Eaton's motion to amend the judgment to add $88,936.98 in supplemental attorneys' fees, costs, and expenses incurred between November 1 and December 31, 2000 is GRANTED.
e. Eaton's motion to amend the judgment to include an award of $1,721,481.38 in prejudgment interest is GRANTED.
3. After amending the judgment pursuant to this Memorandum Decision and Order, the total amount of damages that defendants currently owe Eaton is $6,039,672.36.
AMENDED JUDGMENT
This action came on for trial before the Court and a jury, The Honorable William H. Orrick, District Judge, presiding, and the issues having been duly tried and the jury having duly rendered its verdict,
IT IS ORDERED AND ADJUDGED that:
1. Eaton Corporation ("Eaton") gave proper and timely notice to Signal Technology Microwave Products Division and Signal Technology Corporation (jointly "Signal") of the environmental claims against Eaton in the Sunnyvale Research Plaza Associates ("SRPA") lawsuit and the environmental clean-up order issued by the California Regional Water Quality Control Board.
2. Eaton was legally liable for the claims it settled with SRPA.
3. Eaton's settlement with SRPA was fair and reasonable.
4. The percentage of the environmental contamination that was the subject of the SRPA lawsuit that was caused by Eaton's own conduct is fifty percent (50%).
5. Eaton is awarded $6,039,672.36 in damages from Signal as a result of Signal's breach of the contract.
6. Eaton is entitled to continuing reimbursement for percent of the total reasonable costs and expenses, including, not limited to, consultants' and attorneys' fees, incurred by Eaton and Signetics Corporation for ongoing and future compliance with the California Regional Water Quality Control Board orders regarding remediation of environmental contamination emanating from 680 W. Maude in Sunnyvale, California for as long as Eaton's obligations with respect to those orders continue.