Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alsd-1_06-cv-00171/USCOURTS-alsd-1_06-cv-00171-2/pdf.json

Parties Involved:
Michael Jack Harbin
Defendant
Barry Jernigan
Defendant
Charles A. Novotny
Plaintiff
Red Rock Holdings, LLC
Defendant

Document Text:

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

CHARLES A. NOVOTNY, )

 )

Plaintiff, )

 )

v. ) CIVIL ACTION 06-0171-WS-C

 )

RED ROCK HOLDINGS, LLC, and )

BARRY JERNIGAN, )

 )

Defendants. )

ORDER

This matter is before the Court on Plaintiff Charles A. Novotny’s Response to July 23,

2007 Order Regarding Judgment (doc. 56).

On July 23, 2007, the undersigned entered an Order (doc. 55) expressing unease with

certain aspects of a judgment requested by plaintiff Charles A. Novotny against the two

remaining defendants, Barry Jernigan and Red Rock Holdings, LLC, both of whom are in

default. In particular, the Court identified concerns that Novotny was requesting a judgment as

to Red Rock that incorporated losses outside the scope of his claims against that defendant, that

the form of judgment requested by Novotny raised the specter of a double recovery, and that

some arrangement might be necessary to account for any settlement proceeds paid by a former

defendant, Michael Jack Harbin, to resolve Novotny’s claims against him in this lawsuit. The

July 23 Order explained that the Court’s purpose in raising these issues was neither to impose

additional expense on Novotny, nor to champion the interests of defaulted defendants who have

not seen fit to participate or defend their interests in this action, but was instead to fulfill its duty

to assure the existence of a legitimate basis for any damages award entered.

Novotny has now filed a Response (doc. 56) that substantially and satisfactorily

addresses all of the reservations identified in the July 23 Order. In particular, plaintiff would

confine the default judgment against Red Rock to the particular note payable that is the subject

of his claim against that defendant in the Complaint. With regard to the double recovery issue,

Novotny proposes that the undersigned enter judgment jointly and severally against Red Rock

Case 1:06-cv-00171-WS-C Document 57 Filed 08/21/07 Page 1 of 4
1 No corresponding setoff for the Harbin settlement proceeds will be made with

respect to the residual judgment against Jernigan because Jernigan expressly consented to having

judgment entered against him in the amount of $160,000, without regard to any payments that

had been or might be made by any other defendant. (See July 23 Order, at 5 n.5.)

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and Jernigan for the full amount owed on the note payable, with a further judgment against

Jernigan for the additional amounts to which that defendant agreed to be held liable via his

Confession of Judgment (doc. 46). In order to avoid any confusion as to which judgment is

satisfied first, plaintiff suggests that the judgment specify that any funds collected from Jernigan

must be applied first to the joint and several obligation and then to Jernigan’s residual obligation. 

Finally, to resolve any concerns regarding the Harbin settlement, Novotny proposes that the

$5,000 in settlement proceeds received from Harbin be offset from the joint and several damages

award against Red Rock and Jernigan, such that they will receive credit for settlement proceeds

paid by Harbin. All of these proposals are reasonable and equitable, and the Court is satisfied

that the form of judgment they yield has a legitimate basis in both fact and law.

To avoid any ambiguity in the record, the Court explains the mechanics of the numerical

calculations of the judgment as follows: The value of Novotny’s claim against Red Rock for

default of note payable, as established by the evidentiary submissions of Novotny in support of

his request for default judgment, is $127,500 (which includes $90,000 in principal, plus $39,750

in accrued simple interest at the agreed rate of 10% per annum, from January 2003 through June

2007, less $2,250 in interest payments actually paid by Red Rock in 2003). When the $5,000

settlement payment by Harbin is offset from that amount, the net amount of Novotny’s proven

damages against Red Rock on the default of note payable claim is $122,500.1

 Judgment will be

entered, jointly and severally, against Red Rock and Jernigan (who is alleged in the Complaint to

have fraudulently induced Novotny to lend the money to Red Rock and to have converted the

money for his own use) in that amount. Because Jernigan has consented to entry of judgment

against him in the amount of $160,000, an additional judgment will be entered against Jernigan

for $37,500, which constitutes the difference between the $160,000 figure specified in his

Confession of Judgment and the $122,500 for which Jernigan and Red Rock are being held

jointly and severally liable.

One final complication concerns post-judgment interest. The governing statute is 28

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2 Also significant is the Second Circuit’s decision in Westinghouse Credit Corp. v.

D’Urso, 371 F.3d 96 (2nd Cir. 2004). In that case, the court opined as follows: “Similar to our

sister circuits, we see nothing in § 1961 to prevent parties from setting their own post-judgment

interest rates through private agreements, so long as those rates do not violate state usury or

other applicable laws.” Id. at 101. Notwithstanding that determination, the D’Urso court

declined to apply the interest rate identified in the underlying purchase agreement because a

specific feature of New York law (which governed that agreement) provides that contract

language setting a particular interest rate accruing on a debt is interpreted as applying to the debt

itself, and not to any judgment into which that debt is merged, unless the parties expressly state

their intent to override that general rule. Id. at 102; see also Society of Lloyd’s v. Reinhart, 402

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U.S.C. § 1961(a), which provides that interest on any money judgment in a civil case recovered

in a district court “shall be calculated from the date of the entry of the judgment, at a rate equal

to the weekly average 1-year constant maturity Treasury yield, as published by the Board of

Governors of the Federal Reserve System, for the calendar week preceding[] the date of the

judgment.” Id. (footnote omitted). According to Federal Reserve Statistical Release H.15, dated

August 20, 2007 and found at www.federalreserve.gov/releases/h15/current, the average 1-year

constant maturity Treasury yield for the week ending August 17, 2007 was 4.44%. By contrast,

plaintiffs request that post-judgment interest be awarded at a rate of 10%, which is the rate to

which defendant Jernigan stipulated in his Confession of Judgment and the rate specified in the

promissory note on which the judgment against Red Rock is predicated.

Nothing in § 1961(a) forbids parties from agreeing to a post-judgment interest rate that

differs from that provided by statute. See, e.g., Central States, Southeast and Southwest Areas

Pension Fund v. Bomar Nat., Inc., 253 F.3d 1011, 1020 (7th Cir. 2001) (noting that “[i]t is well

established that parties can agree to an interest rate other than the standard one contained in 28

U.S.C. § 1961” and applying interest rate to which parties had agreed in underlying pension trust

agreement); In re Lift & Equipment Service, Inc., 816 F.2d 1013, 1018 (5th Cir. 1987) (explaining

that “[w]hile 28 U.S.C. § 1961 provides a standard rate of post-judgment interest, the parties are

free to stipulate a different rate,” and applying 10% interest rate set forth in assignment of

accounts receivable, rather than standard rate delineated by § 1961); Horizon Holdings, L.L.C. v.

Genmar Holdings, Inc., 244 F. Supp.2d 1250, 1272-75 (D. Kan. 2003) (surveying case law and

concluding that § 1961(a) does not supersede interest rate agreed upon by parties in underlying

purchase agreement).2

 Accordingly, the Court will award post-judgment interest to plaintiffs at

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F.3d 982, 1004 (10th Cir. 2005) (following D’Urso and finding similar merger principles in Utah

law). The undersigned’s research does not reveal such an idiosyncrasy in Alabama law. To the

contrary, Alabama authority specifically provides that contract interest rates govern postjudgment interest awards in contract actions, even in the absence of the parties’ specific stated

intent that they do so. See Ala. Code § 8-8-10 (“Judgments for the payment of money ..., if

based upon a contract action, bear interest from the day of the cause of action, at the same rate of

interest as stated in said contract.”); Southeast Enterprises, Inc. v. Byrd, 720 So.2d 873, 876-77

(Ala. 1998) (reversing order of trial court awarding post-judgment interest at statutory rate,

where parties had contracted for lower rate in mortgage); Tri-Wood Realty, Inc. v. Pro Par, Inc.,

373 So.2d 297, 300 (Ala. 1979) (determining that post-judgment interest on award should be set

at 10% pursuant to lease agreement provision allowing landlord to recover cost of repairs with

10% interest, with no indication of any specific lease provision that the 10% figure would apply

to any judgment into which the lease debt might be merged).

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the higher, 10% rate to which the parties have agreed, both in the underlying promissory note

and in defendant Jernigan’s Confession of Judgment.

A separate default judgment will be entered against both defendants to implement the

foregoing.

DONE and ORDERED this 21st day of August, 2007.

s/ WILLIAM H. STEELE 

UNITED STATES DISTRICT JUDGE

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