Interest on the award from a judgment must be calculated from the time the district court originally entered judgment when that judgment is later vacated and then reinstated by the appellate court, the 4th U.S. Circuit Court of Appeals has ruled in a case of first impression.
The Nov. 27 opinion stems from a previous 4th Circuit case which was recalled over the appellate court’s omission of details on how the district court should calculate post-judgment interest in a wrongful death suit.
While the plaintiffs’ estates were successful in getting the 4th Circuit to reinstate the punitive damages awarded by a jury against Blue Ridge Health Care Center, the court’s Aug. 2 opinion didn’t clarify when to begin calculating interest on the award, or the rate it at which it should be calculated.
The estates argued that the interest should be tallied from the time the U.S. District Court for the Eastern District of North Carolina entered judgment on the jury’s verdict in February 2017, just months before the same court vacated the $2 million in punitive damages.
Blue Ridge, however, said the interest should be calculated from the time the district court entered judgment in accordance with the 4th Circuit’s mandate, on Sept. 24, 2018.
U.S. District Court Judge Richard Gergel of South Carolina sat the case by designation and wrote the unanimous opinion. Precedent from other federal circuits says that interest should run from the day of the original district court judgment, Gergel said, so that a losing defendant doesn’t benefit monetarily from a district court’s erroneous decision to vacate a judgment.
“These rulings are based on the principle that postjudgment interest should run from the time the amount of the judgment was ‘ascertainable in a meaningful sense,” Gergel said.
He said that in this case, the damages were ascertained “in a meaningful way” when the district court issued its original judgment. Further, Gergel said, the 4th Circuit’s judgment on appeal merely reinstated what the jury had already determined, and as a result, that’s when the damages should be calculated from.
Another issue was the rate at which the interest should be calculated. While the plaintiffs preferred the North Carolina rate of 8 percent, Blue Ridge asked the court to use the federal standard at the time of the judgment, which an attorney said was just under 1 percent.
The estates argued that Blue Ridge waived the application of the federal rate by not previously contesting the use of the higher North Carolina rate. However, Gergel said the matter is “well settled,” and that the federal rate applies to all post-judgment interest, even in diversity actions.
Gregory Brown and Kristi Gavalier of Brown Law in Raleigh, North Carolina, represented Blue Ridge Health Care Center. Brown did not respond to requests for comment before press time.
Rachel Fuerst and Thomas Henson Jr. of Henson Fuerst in Raleigh represented the estates. While Fuerst said she was pleased with the 4th Circuit’s decision about when interest starts to run, she said she’s also disappointed it chose to use the significantly lower federal interest rate.
“We noted that we saw that and asked the court if they’d be willing to change it, and they said no,” she said. “A 7 percent difference in a year and a half on a $2 million verdict is a significant amount.”
Tom Comerford of Comerford & Britt in Winston-Salem, North Carolina, who was not involved in the litigation but reviewed the court’s ruling, said he agreed with Fuerst that the decision to use the federal rate is problematic for plaintiffs.
“Any diversity case in federal court should follow the North Carolina statutes for pre- and post-judgment interest,” Comerford said. “Why should the plaintiff be treated more or less favorably with respect to interest on judgments in a case properly filed in state court than would be the case if the defendant had not removed the case to the federal court?”
Fuerst said that while the opinion is unpublished, she thinks it has value in that it sets a clear guideline where one did not previously exist on the timing of when interest rates should begin running in similar cases.
“There are no other opinions from the 4th Circuit on this specific issue,” she said. “So whether published or unpublished, this is the only opinion on this specific issue from the 4th Circuit. So I believe it has value.”
The seven-page decision is Vandevender v. Blue Ridge of Raleigh.
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