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S W Agency, Inc. v. Foremost Insurance Co.

United States District Court, N.D. Iowa
Nov 23, 1999
No. C92-3071 (N.D. Iowa Nov. 23, 1999)


No. C92-3071.

November 23, 1999.


This matter comes before the court pursuant to plaintiff's application for ruling specifying interest award (docket no. 227). The plaintiff's motion is granted in part and denied in part.


On November 30, 1995, a jury rendered its decision, finding the defendants, Foremost Insurance Company, had breached an oral agreement with the plaintiffs. The jury further found fraudulent nondisclosure and misappropriation of trade secrets; and intentional interference with existing contractual relationships against the defendants. The jury awarded the plaintiff $688,000 in compensatory damages; $8 million in punitive damages against Foremost; and $12,000 in punitive damages against defendant George Shattuck, a senior vice president of Foremost. However, on July 3, 1997, the court set aside the awards of punitive damages on the defendants' post-judgment motion. The court found that the jury had been improperly instructed, and that the punitive damage verdict was impermissibly general. Accordingly, the court set the case for retrial solely on the issue of punitive damages. The parties waived their right to a jury trial, and the second trial was heard from December 8, 1997, until December 12, 1997. On January 21, 1998, the court issued its ruling, finding against defendant Foremost, and awarding $4 million in punitive damages. On May 14, 1999, the U.S. Court of Appeals, Eighth Circuit, affirmed the judgment. On July 8, 1999, the defendants paid the plaintiffs $5,830,561.13 in an effort to satisfy the judgment in this case.

Now, the plaintiffs ask the court to rule on two disputes which remain unresolved between the parties:

A. Whether Foremost has properly calculated the amount of interest due and payable for pre-judgment interest on the compensatory award of $688,000; and
B. Whether interest is payable (and, if so, the rate, and the manner of calculation thereon) on the punitive damage award, post-judgment, from November 30, 1995 until January 21, 1998.
A. Foremost improperly calculated the amount of interest due and payable for pre-judgment interest on the compensatory award of $688,000

The plaintiffs claim they are entitled to $228,958.48 for interest on the $688,000 compensatory judgment awarded to the plaintiffs by the jury on November 30, 1995. That $228,958.48 includes post-judgment interest on the entire compensatory damage award, plus pre-judgment interest. The parties agree that Iowa's pre-1997 interest rate of 10 percent for judgments applies to pre-judgment interest here. On July 8, 1999, defendant Foremost paid the plaintiffs the entirety of the compensatory award ($688,000), plus pre-judgment interest for 1199 days, totaling $226,003.29.

It now claims that plaintiffs are not even entitled to prejudgment interest but clearly plaintiffs were entitled to prejudgment interest. Under Iowa law, prejudgment interest shall be allowed on all money due on judgments. Code of Iowa § 535.3(1).

The parties agree that Iowa law governs pre-judgment interest while federal law governs post-judgment of interest. Berglund v. State Farm Mutual Automobile Ins. Co., 121 F.3d 1225, 1230 (8th Cir. 1997). Pre-judgment interest is awarded to make the claimant whole because the claimant has been denied the use of money that is legally due. Id. The Iowa Code § 535.3 states:

1. Interest shall be allowed on all money due on judgments and decrees of courts at the rate of ten percent per year, unless a different rate is fixed by the contract on which the judgment or decree is rendered . . . The interest shall accrue from the date of the commencement of the action. . . .

Iowa Code § 668.13(5) states:

Interest shall be computed daily to the date of payment, except as may otherwise be ordered by the court . . .

The question before this court is whether the post-judgment interest should cover only the $688,000 compensatory award, or whether it should include the $688,000 compensatory award plus the pre-judgment interest. The defendants agree that federal law controls but then make a state law argument on this issue.

This court finds the plaintiffs are entitled to post-judgment interest on the entire amount of the compensatory judgment, which includes pre-judgment interest. See Fuchs v. Lifetime Doors, Inc., 939 F.2d 1275, 1280 (5th Cir. 1991) ("We direct the district court to award post-judgment interest on the entire amount of the final judgment, including damages, pre-judgment interest, and attorney's fees); Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1030 (4th Cir. 1993) ("The district court should have ordered that post-judgment interest would accrue on $147,885.21, the $82,500 proceeds of the insurance policy plus pre-judgment interest awarded by the court."); Arthur Young Co. v. Reves, 937 F.2d 1310, 1338 (8th Cir. 1991) (" 28 U.S.C. § 1961 specifically authorizes post-judgment interest, and we believe such interest is appropriate on both the damages and pre-judgment interest in this case . . ."); Air Separation v. Lloyd's of London, 45 F.3d 288, 290-91 (9th Cir. 1995) ("Given the policy motivating the award of post-judgment interest — that failure to award post-judgment interest would create an incentive for defendants to exploit the time value of money by frivolously appealing or otherwise delaying payment — and in light of authority in other circuits, we hold that post-judgment interest under 28 U.S.C. § 1961 applies to the pre-judgment interest component of a monetary award").

The defendants have satisfied a portion of the compensatory judgment by paying on July 8, 1999, a total of $1,188,566.10, which included the $688,000 compensatory damage judgment, costs and attorney fees. Also, that sum included $226,003.29 in pre-judgment interest from August 3, 1992, through November 30, 1995. (The defendants formula includes a daily rate of 10 percent divided by 365 equals .0002739 per day. Using the defendants daily rate times 1215 days times $688,000 equals the proper sum due the plaintiff of $228,958.48 in pre-judgment interest on compensatory damages.) Since $226,003.29 already has been paid, the difference due the plaintiffs on pre-judgment interest for the compensatory damage award equals $2,955.19.

The defendants admit that due to a spreadsheet software error, Foremost did not properly compute the number of days from the filing of the lawsuit on August 3, 1992, until November 30, 1995, when the jury returned its verdict for the plaintiff on compensatory damages. Including the day of filing and the day the verdict was handed down, 1,215 days passed. The defendants have paid the judgment on the miscalculation of 1199 days. Thus, the plaintiffs are still due the funds for the difference of 16 days.

With the court finding that $228,958.48 is the total amount of pre-judgment interest on the compensatory damage award, the defendants must re-calculate the amount of post-judgment interest due the plaintiffs. Post-judgment interest must be calculated to include the compensatory damage award plus pre-judgment interest. The parties are in agreement on the mathematical calculations of (1) annual compounding; and (2) a 5.4 percent rate which the defendant used to calculate the post-judgment interest on the compensatory award. The plaintiffs claim the defendants miscalculated the post-trial interest due pursuant to 28 U.S.C. § 1961 by separately calculating the $688,000 compensatory award from November 30, 1995, without acknowledging the $228,958.48 due in pre-judgment interest.

This court agrees. The defendants owe $48,325.59 in post-judgment interest on the pre-judgment interest which had accrued as of November 30, 1995. Taking the amount of pre-judgment interest due as of July 8, 1999, $277.284.07, and deducting the amount of pre-judgment interest due as of November 30, 1995, $228,958.48 (adding the $2,955.19 still due to the $226,003.29 already paid), and the total due to the plaintiffs should be $48,325.59. As a result, the plaintiffs motion is granted.

B. Post-judgment interest is not payable on the punitive award from November 30, 1995 through January 21, 1998

The plaintiffs claim that when the court set aside the $8 million jury award for punitive damages, the court was not modifying the jury's finding of liability; or questioning the propriety of punishing Foremost via punitive damages. The plaintiffs claim the purpose of the second trial was not to challenge these core findings, but rather to apportion punishment. Therefore, the plaintiffs claim that post-judgment interest on punitive damages should be payable from the date of the first judgment, November 30, 1995.

The plaintiff is entitled, by statute 29 U.S.C. § 1961(a) (1988), to post-judgment interest:

Interest shall be allowed on any money judgment in a civil case recovered in a district court . . . Such interest shall be calculated from the date of the entry of the judgment.
However, where there has been more than one judgment § 1961 is silent as to which judgment post-judgment interest accrues from. In this case, there were two dates of judgment to examine — November 30, 1995, when the jury in Trial No. 1 rendered its $8 million punitive damage verdict; and January 21, 1998, when the court in Trial No. 2 found the defendants liable for $4 million in punitive damages. The question before this court is which of these dates is the date of the entry of the judgment from which the post-judgment interest should be calculated.

The purpose of post-judgment interest is to compensate the successful plaintiff for being deprived of compensation for the loss from the time between the ascertainment of the damages and the payment by the defendant. Kaiser Aluminum Chemical Corp v. Bonjorno, 494 U.S. 827, 835-36 (1990). Where the judgment on damages was not supported by the evidence, the damages have not been `ascertained" in any meaningful way. Id. It would be counterintuitive, to say the least, to believe that Congress intended post-judgment interest to be calculated from such a judgment. Id.

When an original judgment is not completely vacated, the date from which post-judgment interest runs turns on the degree to which the original judgment is upheld or invalidated. Johansen v. Combustion Engineering, Inc., 170 F.3d 1320, 1339 (11th Cir. 1999). Where the initial judgment is supported by the evidence and the later judgment merely reflects a remittitur of a certain portion of that judgment as excessive, the courts of appeals have routinely decided that the damages were sufficiently "ascertained" at the time of the first judgment and that post-judgment interest should run from the date of the original judgment. Id. at 1339-40.

This case is factually distinguishable from Johansen. Here, the $8 million jury award of November 30, 1995, was set aside. The process by which punitive damages were determined was flawed. The court ordered a new trial on the facts to determine the issue of punitive damages and the court could have exercised its discretion to award nothing. Once an award of damages has been set aside, it is reasonable to say the damages have not been "ascertained" in any meaningful way.

In Lewis v. Whelan, 99 F.3d 542, 545 (2d Cir. 1996), the court determined that where the first judgment is vacated because it lacks a legal basis or requires further factual development, the vacated award should be treated as a nullity and post-judgment interest therefore accrues from the entry of judgment on remand. See Cordero v. de Jesus-Mendez, 922 F.2d 11, 16 (1st cir. 1990) ("In general, where a first judgment lacks an evidentiary or legal basis, post-judgment interest accrues from the date of the second judgment; where the original judgment is basically sound but is modified on remand, post-judgment interest accrues from the date of the first judgment."); Hysell v. Iowa Pub. Serv. Co., 559 F.2d 468, 476 (8th Cir. 1977) (where original award was vacated, interest accrued from the date of the second judgment). Here, the jury judgment was set aside because the jury was improperly instructed and the court determined that the punitive damage award was too general. A separate and distinct trial was held on the issue of punitive damages, and the court found in favor of the plaintiff and awarded $4 million in punitive damages on January 21, 1998. When the court made its $4 million punitive award determination, judgment in this case was meaningfully ascertained. As a result, the post-judgment interest shall be accrued from the date of January 21, 1998. The plaintiffs motion is denied.

In conclusion, the defendants have admitted that they erroneously calculated the number of days between the filing of the complaint and the judgment. Under federal law, post-judgment interest is calculated on a compensatory damage award plus its prejudgment interest. Finally, post-judgment interest on the punitive damage award here runs from the date of the second judgment.

Upon the foregoing,


That plaintiff's application for ruling is granted and denied as set forth in the text above. The request for oral argument is denied.

Summaries of

S W Agency, Inc. v. Foremost Insurance Co.

United States District Court, N.D. Iowa
Nov 23, 1999
No. C92-3071 (N.D. Iowa Nov. 23, 1999)
Case details for

S W Agency, Inc. v. Foremost Insurance Co.

Case Details


Court:United States District Court, N.D. Iowa

Date published: Nov 23, 1999


No. C92-3071 (N.D. Iowa Nov. 23, 1999)