RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0084p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

WILLIAM J. SCHUMACHER, on behalf of

himself and all persons similarly situated,

Plaintiff-Appellee/Cross-Appellant,

v.

AK STEEL CORPORATION RETIREMENT

ACCUMULATION PENSION PLAN and AK

STEEL CORPORATION BENEFIT PLANS

ADMINISTRATIVE COMMITTEE,

Defendants-Appellants/Cross-Appellees.

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Nos. 12-3061/3063

Appeal from the United States District Court

for the Southern District of Ohio at Cincinnati.

No. 1:09-cv-794—Sandra S. Beckwith, District Judge.

Argued: October 10, 2012

Decided and Filed: March 28, 2013 

Before: BATCHELDER, Chief Judge; KEITH and MARTIN, Circuit Judges.

_________________

COUNSEL

ARGUED: Andrew R. Kaake, FROST BROWN TODD LLC, Cincinnati, Ohio, for

Appellants/Cross-Appellees. Matthew T. Hurst, SUSMAN, HEFFNER & HURST LLP,

Chicago, Illinois, for Appellee/Cross-Appellant. ON BRIEF: Andrew R. Kaake,

George E. Yund, FROST BROWN TODD LLC, Cincinnati, Ohio, for Appellants/CrossAppellees. Matthew T. Hurst, SUSMAN, HEFFNER & HURST LLP, Chicago, Illinois,

for Appellee/Cross-Appellant.

1
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 2

_________________

OPINION

_________________

DAMON J. KEITH, Circuit Judge. This class action case involves AK Steel’s

employees’ Employee Retirement Income Security Act (ERISA) claims for a “whipsaw”

calculation of their benefits from an AK Steel pension plan in which they participated

before terminating their employment. This case is related to the case of West v. AK Steel

Corp. Retirement Accumulation Plan, 484 F.3d 395 (6th Cir. 2007). The Class was

originally involved in the West litigation and included identical claims against the same

defendants. The Class was excluded from the West litigation due to the class members’

execution of a severance agreement and release that each of them signed during the West

litigation. The district court ruled in favor of the Class, awarding partial summary

judgment and an award of pre-judgment interest.

Apellants appeal three district court orders: 1) denial of a motion to dismiss;

2) grant of Schumacher’s motion for class certification; and 3) grant of Schumacher’s

motion for partial summary judgment on liability. The Class cross-appeals the district

court’s decision to award pre-judgment interest at a rate of 0.12%.

For the reasons that follow, we REVERSE the district court’s award of prejudgment interest and REMAND for further proceedings consistent with this opinion.

We AFFIRM the district court’s judgment in all other respects.

FACTUAL BACKGROUND

Plaintiff-Appellee Cross-Appellant William Schumacher brought this case on

behalf of himself and all persons similarly situated (collectively referred to as the

“Class”). The Class in this case is a group of ninety-two former employees of AK Steel

Corporation (“AK Steel”) who participated in the Retirement Accumulation Pension

Plan (“Plan” or “RAPP”). They each elected to receive a lump-sum payment of their

retirement benefits under the Plan which is administered by AK Steel Corporation

Benefit Plans Administrative Committee (“Administrative Committee”). They allege that
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 3

the Defendants failed to properly calculate their payment. Their claims are essentially

identical to the claims that were presented in West v. AK Steel Corp. Retirement

Accumulation Pension Plan, 484 F.3d 395 (6th Cir. 2007), where this Court affirmed the

district court’s decision that the Plan failed to utilize the so-called “whipsaw” formula

to properly calculate lump-sum payments. Plaintiffs in this case were initially included

within the definition of the class that was certified in West, but were ultimately excluded

due to release agreements they signed after the West litigation began. 

West Litigation

After entry of the West class certification order, the Defendants brought to the

attention of the district court that AK Steel had undertaken layoffs in the fall of

2003 after the litigation began, and had offered severance packages to some 300

employees. Ninety-two of the West class members accepted AK Steel’s offer and

executed severance agreements that generally included a release of “all claims” against

AK Steel and its “related entities.” The West Defendants moved for summary judgment

against these ninety-two individuals. Alternatively, Defendants argued these individuals

should be excluded from the already-certified class. Out of an abundance of caution, the

district court also excluded the ninety-two individuals from the West class.

The West plaintiffs ultimately prevailed on the merits of their case and were

awarded over $37 million in additional benefits under the whipsaw calculation, in

addition to pre-judgment interest at the statutory post-judgment rate under 28 U.S.C.

§ 1961(a). At the time of judgment, the rate was 4.7%, which resulted in over $9 million

in pre-judgment interest. We affirmed the district court’s holdings. 

Schumacher Litigation

The complaint in the present case was filed on October 29, 2009, on behalf of a

class of all participants in the Plan seeking “whipsaw” benefits who had been excluded

from the West class. They received lump-sum payments between February 1, 1996 and

August 17, 2006, and were previously excluded from other litigation due to their
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 4

execution of a severance agreement and release. Therefore, some of the following facts

occurred during the pendency of the West litigation.

The layoffs of the ninety-two plaintiffs in the present case started in the midst of

the West litigation. The Human Resources Managers (“HR”) notified the plaintiffs that

they were being terminated. The employees were not told of the ongoing West litigation

and neither was HR. HR followed a script when requesting the signatures. During the

meeting with HR, employees were told that they would “receive information concerning

pension benefits in the mail approximately 60–90 days following termination.” 

The agreements did not mention pension benefits, the Plan, the administrative

committee, or ERISA. Paragraph 9 of each agreement states:

You waive and release and forever discharge, on behalf of yourself and

your heirs, representatives and assigns, AK Steel Holding Corporation,

AK Steel Corporation and its predecessors, and past, current and future,

subsidiaries, related entities, their officers, directors, shareholders,

agents, employees, successors, or assigns, from any and all claims,

causes of action, and rights of recovery of any kind or nature, including

without limitation back or front pay or benefits, damages of any sort,

debts, liabilities, and contract rights, and any costs, fees, or other

expenses or attorneys’ fees incurred in law or in equity, whether known

or unknown. This waiver, release and discharge also includes but is not

limited to any claims, whether known or unknown (including those

arising out of or relating to your employment with the Company and/or

the separation of your employment with the Company) for

discrimination, slander, libel, damage to reputation, emotional distress,

attorney fees, compensatory damages, punitive damages, tort damages,

breach of contract, quasi-contract, promissory estoppel, any violation of

federal, state, local, statutory or common law, including but not limited

to the Age Discrimination in Employment Act of 1967, the Older

Workers’ Benefit Protection Act, Title VII of the Civil Rights Act of

1964, the Family and Medical Leave Act, and the Americans with

Disabilities Act. However, you do not waive, nor shall this Agreement

be construed to waive, any right which is not subject to waiver as a

matter of law. . . . However, [you do not waive any rights or claims you

may have under the federal Age Discrimination in Employment Act that
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 5

1

The bracketed language appears in the particular form of release that Schumacher and other class

members over the age of forty signed. It does not appear in the release form signed by class members

under the age of forty.

arise after the date you sign this Agreement. In addition,]1 you do not

waive, nor shall this Agreement be construed to waive, any right which

is not subject to waiver as a matter of law.

R. 87, at 5. 

Schumacher, the named Plaintiff, was one of the employees who accepted a

severance agreement and release. He worked at AK Steel and its predecessor, Armco

Inc., from June 1962 until he retired in November 2003 at the age of 60. Schumacher

executed a severance agreement sometime between late 2003 and early 2004. He, and

the other Class members, claimed their pension benefits after the execution of the

Severance Agreements, requesting a lump-sum payment. Schumacher’s agreement did

not include a whipsaw calculation.

Pre-Judgment Interest

Both the West and Schumacher classes were awarded pre-judgment interest under

28 U.S.C. § 1961(a). At the time of the West judgment, the class received pre-judgment

interest at an annual rate of 4.7%. The Schumacher class received a rate of 0.12%.

PROCEDURAL BACKGROUND

Schumacher and the Class were originally included in the West Class on March

9, 2004. West, No. 02-0001, R. 55. The district court eventually excluded them from

the West class “out of an abundance of caution.” Schumacher was notified of his

exclusion from the West class.

On October 29, 2009, Schumacher filed the present suit to recover benefits on

behalf of himself and the class. On March 8, 2010, the district court denied Defendants’

motion to dismiss, in which they raised a statute of limitations issue. On January 24,

2011, the court issued an order granting Plaintiff’s motion for class certification. On

June 27, 2011, the court granted Plaintiffs’ motion for partial summary judgment. 
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 6

The parties stipulated that the amount of unpaid benefits to this class was

$3,010,060. On October 12, 2011 the district court issued an order ruling that prejudgment interest was due at the federal statutory rate established by 28 U.S.C.

§ 1961(a). At the time of the judgment, that rate was 0.12%. Final Judgment for

Plaintiffs was entered on December 12, 2011. Plaintiffs were awarded damages of

$3,010,060 and pre-judgment interest of $29,094. 

STANDARD OF REVIEW

This Court reviews a dismissal de novo. Hughes v. Sanders, 469 F.3d 475, 477

(6th Cir. 2006). We also review a district court’s grant of a motion for summary motion

de novo, construing the evidence and drawing all reasonable inferences in favor of the

non-moving party. Ireland v. Tunis, 113 F.3d 1435, 1440 (6th Cir. 1997). 

Certification of a class action is reviewed for an abuse of discretion. Pipefitters

Local 636 Ins. Fund v. Blue Cross Blue Shield of Mich., 654 F.3d 618, 629 (6th Cir.

2011). A district court’s award of pre-judgment interest is also reviewed for abuse of

discretion. Rybarczyk v. TRW, Inc., 235 F.3d 975, 985 (6th Cir. 2000). “An abuse of

discretion occurs when the district court relies on erroneous findings of fact, applies the

wrong legal standard, misapplies the correct legal standard when reaching a conclusion,

or makes a clear error of judgment.” Pipefitters Local 636, 654 F.3d at 629 (internal

citation and quotation marks omitted).

DISCUSSION

This case involves the appeal of four of the district court’s orders. AK Steel and

the Plan (collectively “Appellants”) appeal the district court’s denial of their motion to

dismiss based on the statute of limitations, the grant of the class certification, and the

ruling in favor of the Class on liability. The Class appeals the district court’s prejudgment interest award rate. Each order is addressed below.
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 7

A. Motion to Dismiss

AK Steel and the Plan appeal the denial of their motion to dismiss. They contend

that the Class’s claims should have been dismissed as untimely. Appellants argue that

the Class’s “whipsaw” claims were barred by the federal catch-all statute of limitations

contained in 28 U.S.C. § 1658(a). Upon de novo review, we hold that § 1658(a) does

not apply to the Class’s claims.

“Where a federal statute provides a cause of action but does not specify a

limitations period, courts determine the appropriate statute of limitations in one of two

ways.” McCormick v. Miami Univ., 693 F.3d 654, 662 (6th Cir. 2012). If a federal

cause of action arises under a post-1990 amendment, the courts apply the four-year

statute of limitations as provided by 28 U.S.C. § 1658. If that is not the case, the courts

borrow the state’s most analogous limitations period. See id.

In a case involving a federal cause of action that arises under an Act of Congress

that was enacted after December 1, 1990, the cause of action is “governed by 28 U.S.C.

§ 1658, which prescribes a four-year statute of limitations period.” Id. The Supreme

Court has held that § 1658 applies to claims “arising under” amendments to pre-existing

statutes. Jones v. R.R. Donnelley & Sons Co., 541 U.S. 369, 380–81 (2004). Section

§ 1658 also applies where legislation “establishes a new cause of action without

reference to preexisting law.” Id. (internal quotation marks omitted). 

In contrast, where an application of state law is not “at odds with the purpose or

operation of federal substantive law,” the court borrows the most analogous state

limitations period. McCormick, 693 F.3d at 662 (quoting N. Star Steel Co. v. Thomas,

515 U.S. 29, 35 (1995)). Generally, the statute of limitations for an ERISA claim is

governed by the most analogous state statute of limitations. Santino v. Provident Life

& Accident Ins. Co., 276 F.3d 772, 776 (6th Cir. 2001). Ohio law provides that the

statute of limitations could be as short as six years or as long as fifteen years. See

Gelesky v. AK Steel Corp., 828 F. Supp. 2d 935, 939, 942 (S.D. Ohio 2011) (finding that

the claim was subject to a six-year statute of limitation); see also Meade v. Pension

Appeals & Review Comm., 966 F.2d 190, 193, 195 (6th Cir. 1992) (finding that the claim
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 8

was subject to a fifteen-year statute of limitations). Even under the shorter six-year time

limit, the Class’s claims were timely.

Contrary to Appellants’ argument that the Class’s claim for the payment of

benefits arises from the 1994 Retirement Protection Act (“RPA”), whipsaw actions

predate both the RPA and the passage of § 1658. Thompson, 716 F. Supp. 2d at 762

(finding that RPA “did not ‘create a new right’ for the plaintiffs that did not previously

exist” with respect to a claim involving their lump-sum payments). The ability to bring

a claim for benefits under ERISA § 502(a)(1)(B) was in existence before the RPA.

Furthermore, the RPA did not make any substantive changes, but simply

changed the definition of “applicable interest rate.” The 1994 RPA requires the

calculation of lump-sum payments by using an “applicable mortality table” and an

“applicable interest rate” based on thirty-year treasury rates. Thompson v. Ret. Plan for

Emps. of S.C. Johnson & Sons, Inc., 716 F. Supp. 2d 752, 762 (E.D. Wisc. 2010).

Because passage of the RPA did not create a new right to bring a whipsaw action,

it cannot be said that the Class’s claim “arises under” the post-1990 amendment. The

district court correctly concluded that the Class’s complaint was timely filed.

B. Class Certification

AK Steel and the Plan argue that the district court abused its discretion in

granting the Class’s motion for class certification. Appellants argue that the district

court abused its discretion with respect to the commonality and typicality requirements

of Rule 23(a) and therefore also abused its discretion in finding that common questions

predominated over questions affecting individuals pursuant to Rule 23(b)(3). We

disagree.

To obtain class certification, plaintiffs must show that:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class; (3) the claims

or defenses of the representative parties are typical of the claims or

defenses of the class; and (4) the representative parties will fairly and

adequately protect the interests of the class.
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 9

Fed. R. Civ. P. 23(a); In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig.,

678 F.3d 409, 416 (6th Cir. 2012). “The proposed class must also meet at least one of

the three requirements listed in Rule 23(b).” In re Whirlpool, 678 F.3d at 416 (citing

Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011)).

The district court certified the Schumacher class by concluding that it satisfied

the four prerequisites of Federal Rule of Civil Procedure 23(a)—numerosity,

commonality, typicality, and adequacy of representation. The two common issues that

the district court found appropriate for classwide treatment were: 

(1) whether the anti-alienation provisions of ERISA bar the release of the

whipsaw claims at issue in this case when the general releases do not

expressly refer to the Retirement Plan, to pension benefits, and/or the

ERISA statute; and (2) whether the express terms of the release

agreements included any and all claims against the Defendants in this

case.

R. 60, at 16. The district court also found that the action could be maintained under

Federal Rule of Civil Procedure 23(b)(3) because the issue of whether Plaintiffs were

entitled to whipsaw benefits predominated over any individual issues involved in

calculating the amount of those benefits for each class member. 

The district court first determined the scope and validity of the Severance

Agreements pursuant to general contract law. Releases are contracts. 29 Williston on

Contracts § 73:7 (4th ed. 2011). Therefore, the waivers were properly examined under

normal contract principles first. Id. (citing Raczak v. Ameritech Corp., 103 F.3d 1257,

1268 (6th Cir. 1997) (“[A] court should examine waivers and releases ‘under normal

contract principles[.]’”).

Appellants raise two arguments to support the proposition that the releases

required individualized review. Both fail because, as the district court determined, the

issue of law as to the contracts’ scope and validity precluded the need to conduct an

individualized review. First, Appellants argue that the district court’s decision in the

present case is inconsistent with the West court’s findings that the nature of the releases

required individual review. Id. at 19-20. They also argue that the West court excluded
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 10

Schumacher and the ninety-one others in this class noting that the determination of

whether the Releases were knowingly and voluntarily agreed to would require an

individualized factual review. Id. at 21. Second, Appellants argue that the central

question with respect to the enforceability of the release is whether it was made

knowingly and voluntarily. Id. at 22 (citing Nicklin v. Henderson, 352 F.3d 1077, 1080

(6th Cir. 2003)).

Whether the Severance Agreements were valid–whether they were a violation

of ERISA’s anti-alienation provisions or were obtained by a breach of fiduciary

duties–was a question that the district court properly determined first before inquiring

as to the intent of the parties as Appellants suggest it should have. As the district court

noted, all of the releases were obtained during the 2003 layoffs and were executed in a

short time frame. The critical language of the releases was identical for each plaintiff,

and the common questions identified by the district court did not depend upon the intent

of each employee. The determination of the scope and validity of the agreements

involved common questions of law that lend themselves well for class certification.

Appellants have not shown that the district court abused its discretion in granting

class certification. The court was correct to begin by determining the scope and validity

of the agreements as a common issue of law for the class certification motion. See

Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32, 42 (1st Cir. 2003) (considering the

interpretation of a form contract, executed by all class members as the threshold issue

as to whether common issues of law and fact predominate).

C. Partial Summary Judgment

AK Steel and the Plan appeal the district court’s grant of partial summary

judgment on liability in favor of the Class. The district court interpreted the scope of the

Severance Agreements, holding that the agreements did not affect pension benefits or

preclude pension claims that had not yet accrued at the time the agreements were

executed. Upon de novo review, we agree.
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 11

2

Although the releases in some of the Agreements specifically excluded future claims arising

under the federal Age Discrimination in Employment Act, in light of our discussion below, we believe this

is an insufficient basis for implying waiver of future pension claims arising under ERISA.

This claim is identical to the claims raised in the West litigation. This Court held,

in West, that a so-called “whipsaw calculation” claim “arises when participants opt to

‘cash out’ their hypothetical accounts before they reach normal retirement age.” West,

484 F.3d at 400. In this case, the whipsaw claim could not possibly arise until the

moment a class member opted to cash out her pension in lump-sum form. Because none

of the Class members requested a lump-sum payment until after the execution of the

Severance Agreements, their claims had not accrued. Therefore, the dispositive issue,

as the district court correctly recognized, is whether the text of the general Severance

Agreements released future ERISA claims. 

Paragraph 9 of each agreement provides the waiver and release clause. It states,

in relevant part:

You waive and release . . . AK Steel Holding Corporation, AK Steel

Corporation and its predecessors, and . . . related entities . . . from any

and all claims, causes of action, and rights of recovery of any kind . . .

whether known or unknown. This waiver . . . also includes but is not

limited to any claims, whether known or unknown . . . .

R. 87, at 5.

While the agreement broadly mentions “any and all claims, causes of action, and

rights of recovery of any kind,” what is not mentioned is critical to the question before

the Court. As the district court noted, the agreement does not mention RAPP or the Plan.

It does not contain any words that would support a release of future “ERISA” or

“pension” claims.2

The conclusion made by the district court and adopted by this Court is consistent

with established law and the public policy concerns surrounding earned pension rights.

See, e.g., Ruppert v. Alliant Energy Cash Balance Pension Plan, 255 F.R.D. 628, 635

(W.D. Wisc. 2009) (“[T]o the extent plaintiffs’ releases could be construed as releasing

defendant from this ERISA suit, the agreement would be unenforceable because
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3

While the district court and the parties detail numerous grounds upon which the finding on

liability was correct, we decline to address the remaining arguments; the reasoning here is dispositive.

agreements that waive future violations of ERISA are unenforceable . . . .”); Wright v.

Sw. Bell Tel. Co., 925 F.2d 1288, 1293 (10th Cir. 1991) (holding that a waiver of a right

to sue was insufficient to release future ERISA claims where the parties were unaware

of such claims when the release was signed); see also 29 Williston on Contracts § 73:10

(4th ed.) (“[A] general release will not be construed to bar the enforcement of a claim

that had not accrued as of the date of the release.”). Appellants rely on a series of cases

where courts have held that ERISA claims could be released. As the district court

reasoned, the cases cited by AK Steel and the Plan are distinguishable because each case

involves ERISA claims that had already accrued.3 See Valeck v. Watson Wyatt & Co.,

92 F. App’x 270, 273 (6th Cir. 2004) (finding release effective where the contract

specifically released two named individuals, i.e. “all claims made by [Valeck] or that

could have been made by her against [Defendant] . . . .” prior to the execution of the

release was executed); Halvorson v. Boy Scouts of Am., 215 F.3d 1326, 1326 (6th Cir.

2000) (table) (finding that employee had waived his medical benefits and disability

claims because his medical issues were known before signing the release); see also

Howell v. Motorola, Inc., 633 F.3d 552, 556, 558 (7th Cir. 2011) (noting that the events

leading to the cause of action occurred before the release was signed). Appellants also

rely on cases where future ERISA claims were released. Those cases, however, involved

an explicit reference to “ERISA” in the agreement—a critical distinction from the

present case. See Goepfert v. Trustmark Ins. Co., 541 F. Supp. 2d 1052, 1054 (E.D.

Wisc. 2008) (quoting the language of the release which specifically includes claims

arising from ERISA); see also Sullivan v. CAP Gemini Ernst & Young U.S., 573 F. Supp.

2d 1009, 1021 n.16 (N.D. Ohio 2008) (quoting the language of the release which

explicitly included “any and all rights or claims [. . .] arising under [. . .] [ERISA]”)

(alterations in original).

The Class’s future pension claims were not released as a matter of law because

the whipsaw claims had not accrued at the time of the execution of the Severance
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 13

4

Consequently, Appellants argument that the district court abused its discretion by not allowing

discovery as to whether each Class member knowingly and voluntarily waived the claims is moot.

Agreements and because the scope of the contracts did not relate to future ERISA

claims.4

D. Pre-judgment Interest

The Schumacher Plaintiffs argue that the district court abused its discretion by

awarding pre-judgment interest at the statutory rate under 28 U.S.C. § 1961(a), which

at the time was 0.12%. We agree. The district court’s failure to consider the casespecific factors and its mechanical application of the statutory rate under § 1961

constituted an abuse of discretion.

“[T]he district court may [award pre-judgment interest] at its discretion in

accordance with general equitable principles.” Rybarczyk v TRW, Inc., 235 F.3d 975,

985 (6th Cir. 2000) (quoting Ford v. Uniroyal, 154 F.3d 613, 616 (6th Cir. 1998)). A

proper determination of pre-judgment interest involves a consideration of various casespecific factors and competing interests to achieve a just result. While we have upheld

awards of pre-judgment interest calculated pursuant to 28 U.S.C. § 1961, a mechanical

application of the rate at the time of the award amounts to an abuse of discretion. See

Rybarczyk, 235 F.3d at 985–87.

One purpose of an award of pre-judgment interest is to compensate plaintiffs for

the “lost interest value of money wrongly withheld.” Id. at 985. Courts consider

compensation for the “time value of the lost money as well as for the effects of

inflation.” United States v. City of Warren, 138 F.3d 1083, 1096 (6th Cir. 1998). An

award that fails to make the plaintiff whole due to an inadequate compensation for her

lost use of money frustrates the purpose of ERISA’s remedial scheme. This is also true

of an award that is excessive. See Ford, 154 F.3d at 618. “Our court and others have

. . . upheld awards of pre-judgment interest that were tied to prevailing market rates, thus

reflecting what the defendants would have had to pay in order to borrow the money at

issue.” Rybarczyk, 235 F.3d at 986. 
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 14

An excessive pre-judgment interest award may contravene ERISA’s remedial

goal of simply placing the plaintiff in the position he or she would have occupied but for

the defendant’s wrongdoing. Similarly, an exceedingly low pre-judgment interest rate

fails to make the plaintiff whole. Ford, 154 F.3d at 618. Accordingly, courts must strike

a balance between making sure not to impose a punitive measure and allowing a Plan or

Fund to “retain the interest it earned on funds wrongfully withheld would be to approve

of unjust enrichment.” Rybarczyk, 235 F.3d at 985–86 (internal citation and quotation

marks omitted).

In the West case, the court awarded pre-judgment interest at the rate provided by

28 U.S.C. § 1961(a). Section 1961(a) is the one-year Treasury rate for the week that

precedes a court’s final judgment. At the time the West judgment was awarded, the rate

was 4.7%. At the time of the district court’s judgment in the present case, the rate was

at an all-time low of 0.12%. 

Here, if the 0.12% rate were to stand, AK Steel and the Plan would essentially

be rewarded for their wrongdoing. There are at least three examples that highlight the

potential injustice that could result if the district court’s award were affirmed. First, AK

Steel’s rate on return (6.55%) and its borrowing costs (7.75%) were much higher than

the 0.12% it has been ordered to pay. Allowing such a disparity would result in an

unfair economic benefit to Appellants. See Rybarczyk, 235 F.3d at 986 (“[A]

requirement that [defendants] pay the actual rate [on return] merely deprives

[defendants] of [their] profit on the wrongfully denied benefits.”). Second, the West and

Schumacher plaintiffs are identical plaintiffs. Both sets of plaintiffs worked for the same

company, brought the same whipsaw calculation claims, during the same period, and

were awarded damages under the same calculation. Nevertheless, the West class

members received pre-judgment interest of 4.7%, while the Schumacher plaintiffs

received only 0.12%. Such an absurd result amounts to a reversible error. See Ford, 154

F.3d at 618–19. Third, the Consumer Price Index measured the annual inflation rate at

approximately 2.75%. In City of Warren, this Court held that a district court’s award of

pre-judgment interest that only compensated the plaintiffs for the rate of inflation
Nos. 12-3061/3063 Schumacher v. AK Steel, et al. Page 15

constituted an abuse of discretion where it failed to adequately compensate them for the

lost use of their money. City of Warren, 138 F.3d at 1096.

 Here, the district court’s award of an “exceedingly low pre-judgment interest rate

fail[ed] to make the [Class members] whole by inadequately compensating [them] for

the lost use of money.” See Ford, 154 F.3d at 618. The district court was concerned

with an award that would produce a “windfall” that would punish AK Steel and the Plan,

although it seems that it did the opposite and created a windfall in favor of Appellants’

wrongdoing. See Rybarczyk, 235 F.3d at 987 (“If the award . . . were lower than

[defendant’s] actual rate of return, it is [defendant] that would arguably receive a

windfall.”). Because the award of 0.12% by the district court would inadequately

compensate the Class and unjustly enrich Appellants for their wrongdoing, the district

courts mechanical award of pre-judgment interest rate pursuant to § 1961 constituted an

abuse of discretion. See id. at 985 (“[W]e look with disfavor on simply adopting . . .

interest rates.”). While district courts may fashion an award in their sound discretion,

such an award must consider the case-specific factors such as, but not limited to: the

remedial goal to place the plaintiff in the position that he or she would have occupied

prior to the wrongdoing; the prevention of unjust enrichment on behalf of the wrongdoer;

the lost interest value of money wrongly withheld; and the rate of inflation. Here, the

district court failed to do so. We, therefore, reverse the district court’s application of the

§ 1961 rate and remand on this issue. On remand, the district court shall fashion an

award that considers and balances the interests involved in determining a just prejudgment interest award.

CONCLUSION

For the foregoing reasons, we REVERSE and REMAND the district court’s

award of pre-judgment interest at the rate of 0.12% and AFFIRM the district court’s

judgment in all other respects.